Государственный университет – Высшая Школа Экономики

Демченкова О.А., Якушева И.В.

Introduction into Professional Englishучебник для студентов и аспирантов экономических специальностей

Москва 2009

Методическая записка.

Вы работаете с учебником по английскому языку, предназначенным для студентов и аспирантов экономических специальностей. Учебник состоит из отдельных блоков, раскрывающих различные аспекты темы «Организация бизнеса». Рассматриваются основные экономические системы, роль предприятия как единицы производства, организация малого и большого бизнеса. Отдельно анализируется корпорация, ее организация, управление, финансовые аспекты деятельности. Блоки содержат списки терминов, которые должны быть усвоены в процессе работы над текстами и упражнениями.

Каждый текст снабжен предтекстовыми заданиями, направленными на формирование навыков просмотрового, ознакомительного и изучающего чтения. Выполняйте эти упражнения в предлагаемой последовательности, не начинайте с перевода! Выполнив предтекстовые задания, переходите к переводу. Перевод может оказаться сложнее, чем извлечение информации из текста, но Вы должны научиться грамотно переводить.

Каждый блок завершается рубрикой «Обсуждение». Задания этой рубрики следует использовать на заключительном этапе работы с текстами. Обратите особое внимание на предлагаемый в рубрике «Обсуждение» список словосочетаний. Постарайтесь запомнить их и научиться использовать в речи. Не забывайте, что грамотность речи определяется не столько количеством используемых слов, сколько их правильной сочетаемостью.

Выполняя задания, направленные на обсуждение материала, смелее используйте текст. «Препарируйте» его, оформляйте свои мысли предложениями, абзацами и даже кусками текста, модифицируя их под Ваше содержание. Лучше, чем написано в тексте, не скажете! Если Вы запомните словосочетания и предложения текстов и будете активно использовать их в речи, они вскоре станут для Вас родными. Никто не вспомнит, из какого учебника и текста эти предложения, а Вы заговорите настоящим английским языком, понятным в международном экономическом сообществе. Вопреки мнению многих преподавателей, мы советуем забыть задание на пересказ «своими словами». Ваша задача - облекать свое содержание нужными Вам предложениями и даже фрагментами текста.

Последовательность заданий и подача материала отражают рекомендуемую нами методику работы с учебником. Если Вам трудно справляться с предлагаемыми заданиями, работайте со специально подготовленным учебным пособием для самостоятельной работы: Демченкова О.А. «Practice Book for Independent Studies to the Course “Introduction into Professional English”», которое является неоценимым помощником при работе над текстами, подготовке к занятиям и итоговому контролю.

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Желаем успехов!

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UNIT I ENTERPRISE IN PRODUCTION

Glossary

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enterprise предприятие

branch отpacль, филиал

entrepreneur предприниматель

residual остаток

profit прибыль

incentive стимул, мотив

vest наделять правом, передавать, переходить

(об имуществе)

value ценность, стоимость

value added добавленная стоимость

sign up подписать контракт на выполнение работы

Ex.1 Translate the following groups of words paying attention to the word-building suffixes:

to manage - manager - managerialto divide - division - divisionalto apply - application - applicational frequent - frequently - frequencyenterprise – enterpriser; entrepreneur – entrepreneurshipto tend-tendency

Ex. 2 a) Please, match each new business term with its proper definition:

Capital, entrepreneurship, business, labor, land, entrepreneur, market economy, free enterprise.

1. The factor of production that includes all natural resources, such as mineral deposits, water, and crude oil.

2. The mental and physical effort available to produce goods and services-the human resource.

3. The funds provided by investors, lenders, and the profit retained by the firm to finance the firm’s activities.

4. The process of bringing land, labor and capital together and taking the risk involved in producing goods and services in the hope of making a profit.

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5. The profit-seeking activities that are organized and directed to provide goods and services to customers.

6. Economic philosophies that advocate letting privately owned business firms operate with minimal government control.

7. A risk taker who starts and operates a business in the hope of making a profit

8. An economic system in which prices determine how the factors of production will be used and how the resulting goods and services will be distributed.

b) Give your own definition of enterprise.

Ex.3 Translate the definitions of the following words which are often confused.

Economy – an organized system for the production, distribution and consumption of goods.

Economical (adj.) – using a minimum of resources; or cheap.Economic (adj.) – of or relating to an economy or economics.- Give your own definition of «economics».

Ex. 4 Make sure that you pronounce the following words correctly consulting a dictionary. Translate them.

Although, also, though, thorough, through.

Ex. 5 Consult a dictionary and write down all the meanings of the word "refer". Find the suitable one for text 1.

Ex. 6 Translate the following sentences, paying attention to the underlined constructions.

1) The more enterprisers there are and the easier it is for them to assemble effective combinations of workers and equipment, the more rapidly productivity rises.

2) The larger a firm becomes, the easier it is to grow still larger by trading on its reputation

Ex. 7 a)Translate the following sentences paying attention to the verb "to apply".

1) The more effectively enterprisers can mobilize resources and apply them to production, the easier it is to operate a business firm.

2) The guarantee period does not a pply to parts of rapid wear.

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b)Translate the following word-combinations memorizing combinability of the verb "to apply" and use them in sentences of your own.

to apply rules, to apply regulations, to apply methods, to apply sanctions;safety regulations, hospital regulations, customs regulations, traffic

regulations.

Ex. 8 Match these phrases with their definitions:Self-controlled, self-disciplined, self-employed, self-sufficient.1. Able to provide everything you need for yourself without the help of

other people.2. Easily understood from the information already given and not needing

further explanation.3. Having strong control over your emotions and actions.4. Not working for an employer, but finding work for yourself or having

your own business.5. Paid for only by the money that an activity itself produces.6. The ability to make yourself do things you know you should do, even

when you do not want to.

Assignments to text 1:

1. Read the text and try to find an answer to the question formulated in the headline of the text. 2. Find all definitions given in the text.3. After the second reading formulate the main issues of this text.4. Find answers to the following questions: What is the word “economics” associated with? How is economics as a science classified (divided)? What are the basic inputs of any productive system? What do generally economists study?

Text 1 What is Economics?

What do you think of when you hear the word economics?Money, certainly, and perhaps more complicated things like business,

inflation and unemployment. The science of economics studies all these along with others.

Every society has a limited amount of resources and most societies have people with unlimited wants for items, such as cars, money, and services.

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Economics is the study of how people and a society choose to use scarce resources to satisfy people’s unlimited wants. In economics, the factors of production are the basic inputs of any productive system. These factors are:

1. Land including all natural resources such as mineral deposits, water, crude oil, etc.

2. Labor is the mental and physical effort of human resources available in the work force of a given country or society. Unskilled, semiskilled workers are terms that describe different types of labor. Management skill is also a type of labor.

3. Capital is the funds provided by investors, lenders, and the profits retained by the firm to finance the firm’s activities. Capital goods are equipment, factories, or anything made by humans that help to produce and distribute products.

4. Entrepreneurship is the process of bringing land, labor, and capital together and taking the risk involved in producing a good or service in hope of making profit.

Very simply, economics studies the way people deal with a fact of life: resources are limited, but our demand for them is not. Resources may be material things, such as food, housing and heating. But time space and convenience, for example, are also resources. Think of a day. There are only 24 hours in one, and we have to choose the best way to spend them. Our everyday life is full of decisions like this. Every decision we make is a trade-off. If you spend more time working, you make more money. However, you will have less time to relax.

Economists study the trade-offs people make. They study the reasons for their decisions. They look at the effects those decisions have on our life and society.

Economists talk about microeconomics and macroeconomics. Macroeconomics is the study of the overall operations of an economic

system. It looks at the economy of a country and of the whole world.Microeconomics deals with people and private businesses. It looks at the

economic decisions people make every day. Microeconomics also deals with companies – small or large – and how they run their business. Any economist will tell you, though, that microeconomics and macroeconomics are closely related. All of our daily microeconomic decisions have an effect on the wider world around us.

Assignments to text 2:

1. Read the text and formulate its theme.2. Give the headline which would reveal the theme.3. Write down the key-words and word-combinations which help to define

the topic.

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4. Translate the text and formulate the main idea.

Text 2

The basic unit of planning and control over production is the enterprise. All modern economic societies have such control units but there are wide differences in the ways they are organized.Indeed, the organisation of enterprise is one of the characteristics distinguishing different types of economic systems.

An economic system is a framework of arrangements for carrying out the specialization and exchange process. Specialization ( or division of labor) is the division of work into component tasks, so that each worker can concentrate on perfoming the particular task instead of many tasks. Exchange is trade, or giving up one thing to get another.

It’s common nowadays to distinguish socialist, capitalist and mixed economic systems.

In a socialist economy like the former USSR, most production was centrally planned, controlled and financed. Thus the Soviet economic system was characterized by centralized enterprise and actually functioned much like a single giant consolidated firm. Although socialist production was subdivided into managerial units that were frequently referred to as "enterprises", these smaller units had minimum responsibility for planning and control, and they functioned more like branches or divisions of an enterprise than like individual business firms.

In contrast, an economic system like that of the United States is characterised by private enterprise, that is control and financing of most production are vested in independent, privately organised enterprises.

Capitalists believe that firms that compete with one another to serve customers best serve society. They argue that capitalism offers people the most rights and economic freedom. It also offers freedom to compete private ownership of property, choice of occupation, profit incentives, consumer power. The role of government is limited.

Since no real world economic system is purely capitalistic, communistic or socialistic, we say that economic systems today are mixed. A mixed economy is a blend of private enterprise, government ownership, and government planning.

This textbook is devoted mainly to the institutional organisation of the private enterprises as business firms. You'll come to know different types of firms, and you’ll see how the modern corporation has emerged to meet the needs of mass-production techniques for which huge amounts of capital must be privately assembled under central control, and how the increasing complexity of corporate organisation has required government regulation.

Without going deeply into the problems of accounting, we will examine the statements that summarize the financial position and operations of a business

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firm, and we will conclude the review of the businesses with an examination of the giant corporation and discussion on how to start your own business.

Assignment s to text 3:

1. Read the text and indicate whether you find the headline informative enough.2. Find the definition of an entrepreneur.3. Find the sentences which describe personal qualities of an entrepreneur.4. Specify what kind of a risk the author writes about.5. Look through the text and headline every paragraph.5. Translate the text and write down the words to characterise entrepreneurs.

Text 3 Risks in Entrepreneurship

In order for modern production to occur, somebody must decide what products are to be produced. Someone must take the initiative in bringing men, machines and materials together; assign jobs; and organize and direct the operations. The important function of initiating and organizing production is called enterprise, and people who perform this function are called entrepreneurs, or enterprisers.

Skillful, energetic, and imaginative enterprisers are the most valuable of all our productive resources. Without them, resources and labor represent only unrealized possibilities. The more enterprisers there are, and the easier it is for them to assemble effective combinations of workers and equipment, the more rapidly productivity rises. In an economic system like America's, enterprisers organize firms to carry out their plans.

It requires their full attention. Such firms can seldom afford to hire enough employees, even if the firm succeeds, you might work hard for months and not take a penny out except for the salary you pay yourself. Moreover, there always exists a risk of failure. Entrepreneurs generate ideas but of course, not every new idea is a good one. Sometimes expensive equipment and labour are assembled to make something that few people want. Sometimes the enterpriser is less effective as a manager than he thought he would be. Sometimes a better idea, a superior product, or a cheaper process is developed a little later. In each of these cases, the enterpriser has made a mistake. The labour, materials, and equipment assembled by the firm actually have produced something less valuable than they could have in some other employment. Instead of raising productivity, the enterpriser has actually lowered it.

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Before it commits resources to new uses, society must protect itself from the consequences of such mistakes by making sure that enterprisers balance the gains possible from successful organization against the losses that will accompany failure. This is done by requiring the enterpriser to finance part of the investment with his own money and to receive, as his reward, only the residual of the value added by the operation, after all claims have been paid. If he is successful in taking labour, equipment, and materials from less valuable jobs and using them to produce a more valuable profit, the profit resulting from the difference in value is his. If he is unsuccessful and puts valuable resources to a less valuable use, the loss is also his. His investment acts as a buffer to the rest of society, protecting it from his mistake.

Read the following related statements and underline the key words that describe the qualities of an entrepreneur. Add to this list the words from text 3 and other relevant vocabulary.

There are two things that entrepreneurs have that others do not. One is a kind of visionary imagination to spot a commercial opportunity where others simply do not see it. And the second is the ability to persevere in the face of skepticism or criticism even the fear of failure.

George Smith, Harvard University

Entrepreneurs perform the function of creative destruction. They rethink conventional assumptions and discard those that no longer apply. They reform or revolutionize the pattern of production by exploiting an invention or an untried technological possibility for production, by opening up a new source of supply for materials or a new outlet for products, by reorganizing industry.

Joseph Schumpeter, Harvard University

Assignments to text 4:

1. Read the following text. 2. Find the factors which contributed to the success of Barbara Proctor.3. Find the sentences which reveal Barbara’s personal qualities which

helped her succeed.4. Translate the text.5. Answer the following questions:

What obstacles did Barbara have to overcome? What personal qualities helped her overcome such obstacles? Describe some of the experiences she has had in her life. Assess Barbara’s entrepreneurial skills.

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Text 4 Against All Odds: Barbara Proctor, Millionaire

“The spirit of enterprise is sparked by small business people with big ideas- people like Barbara Proctor, who rose from a ghetto to build a multimillion dollar agency in Chicago.” Thus did President Ronald Reagan describe Barbara Proctor in his 1984 State of the Union Address. Proctor& Gardner is on of the leading advertising agencies in the US. It specializes in the black consumer market and handles more than US$ 12 million in business annually. How did a black woman lift herself out of poverty to excel in a career dominated by men?

Barbara Proctor was born in Asheville, North Carolina, in 1932. Her parents never married, and Barbara was left in the care of her grandmother. “If there ever was a guiding force in my life it was my grandmother”, Barbara explained. “She is the one who taught me to accept your circumstances because it is only by accepting them that you can deal with them.” Barbara lived with her grandmother in a shack that had no water and no electricity. Her grandmother, who worked as a maid, was determined to see Barbara achieve her goal in life.

With the help of a scholarship and savings from summer jobs, Barbara graduated from Talladega College in Alabama. But success did not come easy. After a short career in the record business, Barbara worked for several advertising agencies in Chicago. The highest position she reached was copy supervisor. She was fired from that job when she refused to write a television commercial she considered offensive to blacks.

She had her own ideas about running an advertising agency. In 1970 she received an US$80,000 loan from the Small Business Administration that enabled her to open her own company. She called her agency Proctor & Gardner because, she explained, “clients assumed a Mr. Gardner was sitting back there manning the shop with everything under control”. There was, of course, no Mr. Gardner.

Starting from a few employees and working out of an office above a pizza store, Barbara worked incessantly to achieve her goals. Her single-mindedness combined with her enormous creative abilities to guarantee her success. She signed up large companies interested in advertising aimed at blacks. Before long her staff grew to 30 employees, and her clients included Sears, Roebuck&Co., Alberto-Culver Company and Kraft Foods.

Today she is considered one of America’s outstanding businesswomen. Her innovative marketing and creative concepts have been widely recognized. Her awards include Achievement in the Business World of Black Women, Women’s Day Advertising Merit Award, and Dynamic Woman of the Year. United Airlines Magazine called her “one of the most courageous people in the ad business, who is constantly tackling new challenges.”

Assignments to text 5:

1. Assess potential of M.Twain for entrepreneurship.

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2. What struck your most in this story? 3. Read the first sentence and say if you agree that Mark Twain’s example

should be avoided. Why?4. Would you like to have M.Twain as your business partner?

Text 5 Mark Twain as a BusinessmanMark Twain commenting on his experience once said, “To succeed in

business, avoid my example”. The reality of his life was that he had probably had more exposure to business than most writers of his time. He sold his books by subscription, making millions of dollars. He marketed his products well, selling even a scrapbook he invented and one of the first photographic albums. But like many small businesspersons, he had some costly failures including an invention he called the Paige typesetter. Another invention was a device he hoped would prevent children from falling out of their beds—it was a business failure. He also invented a much too complicated table game and a medicine that was supposed to cure all illnesses.

Mark Twain was creative and talented in many ways and he made and lost several fortunes as a businessman during his lifetime. It might be noted, however, that even though he made errors and lost a great deal of money, he always made good on his debts. One noted example of this is when his publishing went bankrupt in 1894. Twain was able to pay back his creditors all the money that had been lost in the venture within four years of the business failure.

Discussion

These are some helpful word-combination in addition to the glossary that you will translate, memorize, and use while discussing the texts.

a) To initiate production, to carry out specialization, to apply rules (regulations, methods) to set up a firm, to operate a firm, to take initiative, to assign jobs, to organize and direct operations, to perform functions, to carry out plans, to mobilize resources, to raise (lower) productivity, to meet needs (requirements).

b) Mental (physical) effort, economic freedom, economic society, centralized enterprise, consolidated firm, socialist/ capitalist production, private enterprise, institutional organization, central control, increasing complexity, valuable resource, superior product.

1. Economic theories and models are accurate statements of reality. Is this true?

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2. Discuss the main difference between a capitalist and socialist economy.

3. How could you characterize the Russian economic system? Give a definition of this system.

4. How would you explain the decline of communism during recent years?

5. Give your own definitions of the following: enterprise economic system mixed economy specialization exchange

6. Describe the usual activities of an entrepreneur. Would you like to become an entrepreneur? Why?

7. Assess your potential for entrepreneurship: Entrepreneurs have a strong need to achieve. They take reasonable risks. Press inward in spite of setbacks. Set goals and commit to meeting them. Communicate with others. Tolerate rejection, frustration, and stress. Make decisions and carry them out. Learn from mistakes. Think creatively and analytically.

8. Do you know any enterpriser that meets the needs of the Russian economy? Include in your own report the background of each, how they got started in their business, how the business was financed, what each entrepreneur has to make them successful and what their future plans are.9. Do you agree with the following statements from the text:

Not every new idea is a good one. Skilful, energetic, and imaginative enterprisers are the most valuable

of our productive resources. Without entrepreneurs resources and labour represent only

unrealized possibilities.

Test yourself. Render into English.Предпринимательство. Формы предпринимательской деятельности.

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Предпринимательство - самостоятельная, инициативная, систематическая деятельность на свой риск по производству продукции, выполнению работ, оказанию услуг и занятие торговлей с целью получения прибыли. Слово «предприниматель» происходит от французского «антрепренер»- человек, бравшийся за организацию празднества, постройку храма. Заключался договор, выполнялось обязательство, оставшиеся деньги составляли доход.

В 18в. предпринимательство стало деятельностью в условиях риска. Доход с капитала отделился от дохода с предпринимательской деятельности. Со временем предпринимательство стало не типом деятельности, а типом поведения. К 19в. предприниматель становится тождественен менеджеру. В 20в. предпринимательство стало деятельностью, в результате которой человек создает что-либо новое в условиях риска.

Предпринимательство- умение таким образом сочетать факторы производства, в результате которого будет получена максимальная прибыль.

For your notes:

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UNIT II SMALL-SCALE BUSINESS

Glossarysole proprietorship частное предприятие

to be liable(for) нести юридическую ответственность

debt долг

to cover debts покрыть долги

to sue возбуждать уголовное дело;

подвергнуть судебному разбирательству

to accrue нарастать , накапливаться

efficient производительный, эффективный

to undertake предпринимать что-либо,

брать на себя определенные функции

to borrow занимать, одалживать

equity доля собственности

assets активы

partnership товарищество

estate имущество, состояние

indemnity гарантия от убытков;

возмещение; компенсация

severally отдельно, индивидуально

allot выделять, предназначать, отводить

security обеспечение, гарантия, залог.

incur (liability, losses) нести (юр. ответственность, убытки)

commit поручать, закладывать, передавать

memorandum of association = договор об учреждении акционерного

articles of association общества, устав

GDP= Gross Domestic Product ВВП=Внутренний Валовый Продукт

concert согласие

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Ex. 1 Translate the following groups of words paying attention to the word-building elements:

efficient - efficiency - efficiently; severe - severely -severity; to supplement - a supplement - supplementary; to adapt – adaptation – adaptive - adaptor; to tend - tendency; to process – process – processor; to insure - insurance; to produce - production -productive - productivity; legal - legally- illegally; to own - own - owner - ownership; enterprise - enterpriser; to borrow – borrowing - borrower, to promote - promotion-promotional - promoter, liable – liability; to undertake – undertaking – undertaker.

Ex. 2 Consult a dictionary and write down all the meanings of the words "share" and "due". What meaning is suitable for the texts of this unit?

Ex. 3 Translate the following sentence paying attention to the word "cushion". Explain the interconnection between the primary and contextual meanings.

A firm that loses can still repay its debts as long as the loss is no larger than the owner's own investment in the business, for the owner's share of the total wealth, the owner's equity, provides a cushion to protect the creditors.

Ex. 4 Match the words from list A with their synonyms from list B:

A. type, proprietorship, to center, profit, to be liable, distinction, owner, sole, incentive, efficient, to encourage, to involve, undertaking, possession.

B. Private, enterprise, to include, property, to stimulate, successful, possessor, stimulus, difference, to be responsible, income, to concentrate, ownership, kind.

Ex. 5 Build sentences with the words below using the expressionIt takes … to do … :

1. nerve to translate a book2. time and effort to make a quarrel3. months to survive in a competitive environment 4. talent to buy an apartment 5. a lot of money to write poetry6. two to learn a language 7. great skill to make jewelry8. years of work to build a corporation9. luck to succeed in a business10.determination to contradict your boss

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11.investment to increase output12.specialized management to keep the right business strategy13.persuasion to get a majority at a stockholders' meeting14.well-kept records to operate a business15.positive balance to achieve production economy16.good advertising strategy to keep track of the markets17.capital to bring out a new product18.resources to raise capital

Assignments to text 1 :

1. Read the text and find an answer to the question in the headline.2. What criteria should a company meet to be classified as a small-scale

business?3. Look through the text and divide it into logical parts.4. Give reasons for your division writing down the topic of each paragraph.5. Make up a plan of the text. Supplement every item with key words or word-

combinations which would help to retell the text.6. Translate the text.7. Explain how small businesses keep “the American dream” alive.

Text 1 What is a Small Business?

The Committee on Economic Development defines a small business as a form that meets two or more of the following criteria: 1) the owners manage the business, 2) one person or a small group of people provide the financing, 3) the owners and employees live near the firm, and 4) the form is small in comparison to others in the same industry (size may be measured in assets, number of employees or sales revenues).

A small business as defined by the Small Business Administration is a business that is independently owned and operated and is not dominant in the field.

Small businesses exist in every type of industry, but are most important in the retail trade (bakery, greeting cards, compact disks, jewellery shops and stores), services (barbershops, restaurants, dry cleaners, dentists, and funeral homes), construction (builders of homes, apartment complexes, swimming pools and roads), wholesale trade (grocery product and beauty supply wholesales).

According to American statistics small firms employ 60 percent of the nation’s private sector labour force and generate almost one half of the GDP (Gross Domestic Product). They furnish two of three workers with their first job

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and provide many jobs for teenagers, women, minorities and immigrants. Jobs the companies generate are more likely to be filled with younger, older, and female workers. Small firms also introduce many new products. They are important suppliers to large firms.

It is not вy chance that American government encourages activities of business incubators. Business incubator is a facility operated by a government unit, a university, or a private investment group to provide low rent, shared office services, and management advice to business ventures.

So, small businesses keep “the American dream” alive.

Assignments to text 2 :

1. Read the text; write down the first sentence of every paragraph. Indicate if they are interconnected and how.2. Look through the text and indicate if these sentences can make up a plan of this text.3. Find the definition of a sole proprietorship.4. Refer to the text; find the following fragment of the sentence from the second paragraph “Moreover, identification of the owner with the business...”. Explain it paraphrasing in English. Find the sentence in the first paragraph expressing the same idea.5. Translate the text.

Text 2 The Sole Proprietorship

The simplest type of a firm is the sole proprietorship. This is a firm owned by a single person. All the firm's decisions are centred in him, all profit from the firm is his, and he is personally liable for all the firm’s debts. In a sole proprietorship there is no legal distinction between the personality and possessions of the owner and those of the firm. In fact the owner is the firm and is personally responsible for everything the firm does.

There are several advantages to the sole proprietorship. It is legally simple and easy to establish. Moreover the identification of the owner with the business provides a powerful incentive for efficient operation, and encourages careful weighing of the risks involved in the undertaking.

38 percent of small business owners in the USA in a survey gave the following as the main reason for going into business for themselves: to be their own boss and have more control over their work and their lives. Entrepreneurs seldom complain that running their own firm is routine and boring. It’s possible to make a lot of money. Any profit the firm makes accrues directly to the owner. So, the owners can get personal satisfaction from guiding the firm’s growth as well as from making money.

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As for disadvantages, being in business for yourself requires your full attention. The owners must “wear many hats” as they can seldom afford to hire enough employees so that each can specialize and be responsible for a special aspect. You might work for months and not take a penny out. You may also have to reinvest your profits in the firm for long-term growth.

In case of failure, not only can an enterpriser lose all he has invested in the firm directly but if this is not enough to cover the firm's debts, he can be sued personally for the balance.

Overall, the two main causes of small business failures are poor management and inadequate financing.

Assignments to text 3:

1. Read and translate the headline of the text. 2. Look through the text and try to find the key sentences in which the main limitations to the size of proprietorship are formulated. How many limitations are discussed in the text?3. Give annotation of the text before translating it into Russian. 4. Translate the text, now check:

if you counted the limitations correctly, if you missed any important idea before translation.

5. After reading the text 2 and text 3 make up a plan for your report about sole proprietorship as a form of a small-scale business.

Text 3 Limitations to the Size of Proprietorship

Its simplicity makes the proprietorship especially well adapted to small-scale business. However, there are several limitations to its size. First, the proprietorship can grow no larger than the wealth of a single person will permit. In an age of large-scale operations that often require expensive, specialized equipment, few people can accumulate enough capital to finance efficient production.

Of course, the proprietor can supplement his own wealth by borrowing from other people, but his resources limit even this technique. The reason is, of course, the ever-present risk of losses. A firm that loses can still repay its debts as long as the loss is no larger than the owner’s own investment in the business, for the owner's share of the total wealth of the firm, the owner's equity, provides a cushion to protect the creditors. When a $1 million firm is financed by $750,000 invested by the owner and $250,000 borrowed from the creditors, the owner's equity is $750,000. If the firm has to be liquidated, the assets can lose this much value and creditors will still receive 100 cents on the dollar. If the owner's equity were only

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$250,000 and $750 000 were borrowed, however any loss in asset value exceeding $250,000 would involve losses to creditors.

A second limitation to the size of a sole proprietorship is the difficulty of changing ownership. Investment in a personal business is necessarily a long-term proposition. To get out for any reason - perhaps to follow a more profitable venture in another line - requires sale of the physical assets of the business to a new owner, which is a slow process. It takes more enterprising talent and organising skills to start a successful business than it does to keep one going after it has been set up. So, the owner must find another man who combines the ability to run the business with the desire to enter it, and who has the money to buy out the owner's equity. It may take months in the USA to find the right man, and if the owner is in a hurry to sell out he may have to sacrifice a substantial part of the value of the firm.

The difficulties involved in selling a sole proprietorship are connected to some extent with the fact that this type of business tends to tie down those with the greatest talent for business organization. Economic growth will be most rapid when those with the greatest initiative and talent can specialize in setting up new firms to exploit new opportunities. This is impossible if, once the firm is established, the organizer cannot sell it to somebody else to run, and move on to new fields. This fact becomes a serious limitation to an economic system that depends on private enterprise to get things done in the best way.

Assignments to text 4:

1. Read the text and make a plan of it. Isn't it similar to the plan you've made for your report about sole proprietorship?2. Find the definition of a partnership.3. Are there any similarities between sole proprietorships and partnerships? Prove your answer by the sentences from the text.4. Is there any information about limitations to the size of partnerships? Prove your answer by the sentences from the text.5. Translate the text and check again if you’ve missed any information before translation.

Text 4 The Partnership

A logical way to increase to capital available to a firm is to increase the number of owners. A partnership is a legal relation existing between two or more persons contractually associated as joint principals, or persons entitled to the profits and liable for the debts of a business. The key elements of a partnership are community of interest and sharing of profit.

A partnership is usually based upon a partnership agreement (i.e., a contract). In the US, a written agreement is usually required only if the partnership must

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continue for more than one year, or deals with third persons in real estate. A partnership is composed of several owners who pool their resources together to form the firm. The partners agree among themselves about how much capital each is to contribute, what role each will play in the management, and how much each will share in the profits. In the US, partners can be divided into general partners, i.e. persons who have management responsibilities and full liability for the partnership debts, and limited partner who make contributions of cash or other property but are not involved in the daily management of the business, and whose liability is limited to the amount of their contribution. Hence, there are “general” and “limited” partnerships. Note that the limited partnership must have at least one general partner.

The partnership contract legally defines the duties and the responsibilities of the partners to each other. A partner’s rights are: rights in specific partnership property, interest in partnership, right to participate in management. Each partner is an agent of the partnership for the purposes of its business, and each partner may execute transactions which bind the partnership. Partners are jointly liable for partnership debts and contracts. Between themselves, partners are fiduciaries (i.e. persons, whose relations are based on trust). Thus partners must account to each other for profits, refrain from engaging in competitive business without other partners’ concert and hold partnership assets in their own name. Books and records must be made accessible to all partners. Profits are divided per agreement (with losses in the like proportion).

As far as the public is concerned, however, each of the partners has the legal status of a sole proprietor. Each partner can sign contracts for the firm, can buy or sell goods or assets belonging to the firm, can borrow or lend, on the firm's behalf, and can commit the firm just as a sole proprietor could. Such a commitment is legally binding on the firm and on all the other partners as owners of the firm, whether they agree to it or not. Moreover, each partner is fully liable for all the firm's debts, just as if he were the sole owner. If the firm fails, leaving assets inadequate to cover its debts, creditors can sue any partner individually to collect the balance due. The legal responsibility of partners for each other’s acts necessarily confines partnerships to small groups of people with complete confidence in one another. For this reason partnerships rarely grow large enough to apply modern production methods.

A partnership is doomed to failure when partners have very different ideas about what constitutes ethical business behaviour.

Changing ownership of a partnership is even more of a problem than it is for a sole proprietorship. Unless otherwise provided by the agreement of partners, a partnership can be dissolved upon the expiration of the partnership term, expulsion, withdrawal or admission of a partner and death or bankruptcy of a partner. Any or all partners can affect its dissolution merely by expressing their will to do so. If a partner demands an early dissolution of a partnership for fixed term he may be liable for losses caused by the dissolution.

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The dissolution doesn’t terminate partnership immediately, partnership relationship continues until the business is wound up. Conversely, a new partnership can be formed to carry on the business of the previous partnership. Still, since partnerships are formed by a legal contract among the owners, the withdrawal of any partner requires that the business be completely reorganized.

A partnership is automatically terminated by the death of a partner, and must be reorganized as a new firm.

Assignments to text 5 :

1. Read the following and add some ideas about how to become a small business owner.

2. Do you agree that information is power?3. What information sources can help a small business owner in Russia?

Text 5 How to Become a Small Business Owner

A person becomes a small business owner in one of three ways: taking over the family business; buying an existing business; or staring a new firm.

a. Taking over the family’s Business – Those with experience in the business have a good chance to succeed. Those with no experience have a good chance of failing.

b. Buying an Existing Firm- It is critical that you find out why the owner is selling and how profitable the firm has been in recent years.

c. Starting a New Firm –It is a fresh start with no bad reputation to overcome or obsolete plant or materials, but you also have no customer base to begin bringing money.

Starting a small business takes a lot of planning and know-how. At the very least you should consult an accountant, an insurance agent, a lawyer, and a banker for the following:

1. Conducting a Situation AssessmentIn a situation assessment you take an in-depth look at both yourself

and the business environment.2. Developing an Overall Business Plan

A business plan is a document that spells out in detail a firm's objectives, form of ownership, and actions needed to achieve the objectives.

3. Projecting Financing NeedsProjecting financing needs requires (1) setting up a capital budget,

(2) preparing month-by-month projected income statements, (3)

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preparing month-by-month projected cash flow statements, and (4) preparing a projected balance sheet.

4. Securing the Needed Resources and PermitsA new firm secures the needed capital through equity or debt

financing. Equity capital is funds provided by the owner. 'Debt funds are borrowed funds. Venture capitalists are individuals and businesses willing to provide money to entrepreneurs who have new products or new-product ideas that are as yet unproven on the market but have a good chance of becoming successful.

5. Establishing Internal Control ProceduresInternal controls include an accounting system and a security

system.6. Starting to Serve Customers

Your firm will not be profitable if its costs are greater than its sales revenues. Keeping track of costs and measuring progress against the firm's objectives is called control.

Successful small business expansions and new formations lead the way in creating new markets, innovations, and jobs that fuel economic growth and prosperity. Your success in business depends on what you know and how well you can apply what you have learned.

In recognition of the importance of small business to a strong economy, Apple Computer, Inc. has joined with the U.S. Small Business Administration (SBA) to help meet the information needs of existing business owners and aspiring entrepreneurs by providing the necessary information.

The Importance of InformationInformation is power. It is an asset that can help overcome uncertainty and open

new avenues for opportunity. With the right information, your business gains an important edge in today's competitive world. Learn to use information sources. They are the key to unlocking your business's full potential.

The Small Business AdministrationThe SBA is an independent government agency created by Congress to help

small businesses grow and prosper. The SBA has over 100 offices that offer small firms financial assistance through guaranteed loans, management assistance, help in obtaining government contracts, counselling services, and many low-cost publications. The SBA is an excellent source of information.

Assignments to text 6:

1. Read the following descriptions given in a jumble order. Match the following factors with the sentences which explain and clarify them. Greater flexibility More personal attention to customers and employees

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Lower fixed costs Greater motivation of the owners Poor management Inadequate financing Ethical issues in partnership

2. Now write them out in two separate paragraphs, one including factors in small business success, the other – factors in small business failure.

Text 6 Success and Failure in Small Businesses

1. An entrepreneur is a risk taker who starts and operates a business in the hope of making a profit.

2. Researchers who study small business failures agree that the number one cause of business failure is poor management.

3. The same is true in the relationship they have with employees.4. Fixed costs are costs that don’t vary in total as the volume of business

varies.5. This includes little preparation to run a business, failure to learn from

experience, and unbridled optimism.6. Small business owners have more direct contact with their customers and

have a better feel for what they wan.7. Over all, the two main causes of small business failures are poor

management and inadequate financing.8. Small firms tend to be more flexible than large firms.9. Many small businesses are partnerships.10.They can adapt to environmental and customer demands quickly.11.For example, prospective partners should make sure that their work habits

and ethics are compatible.12.Many small business owners start out with too little capital and too few

sources of funds.13.Since small business owners have personal risk, they are motivated to work

harder. Roughly 50 percent of new start-ups fail within the first five years.14.A secondary source is lending institutions, but they are reluctant to lend to

start-ups because of the small company’s lack of assets for collateral.15.Lawyers, psychologists, and business consultants know that problems

among partners are common.16.Dun&Bradstreet Corporation lists the reasons for such failure as neglect,

disaster, fraud, economic factors, lack of experience, sales, expenses, customers, assets, and capital needs.

17.The main source for new firms are friends, families, and savings.

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18.The best way to avoid difficulties is to exercise extreme care in selecting partners.

Discussion

These are some helpful word-combinations in addition to the glossary that you will translate, memorize, and use while discussing the problems.

to start business, to exploit new opportunities, to pool resources, to share in the profits, to borrow/lend money, to be liable for, to provide a powerful incentive, to apply modern methods, to carry out life insurance, to balance the gains against losses, to change ownership, to set up a firm, to incur (un)limited liability, to carry on a business, to form partnership, to engage in business, to acquire the advantage, to hold shares, to carry on a business, to locate liability, to fuel prosperity/growth, to gain an edge.

1. Explain what a small business firm is.2. What form of a small-scale business attracts you most? Why?3. Isn’t a partnership less risky than a sole proprietorship? Either you agree or disagree, give your reasons. 4. Explain to a fresher what is understood under changing of ownership and why it is a severe limitation to the size of small businesses.5.What kind of a business partner would you like to have?6. What kind of a firm would you like to set up? Contrast advantages against disadvantages of sole proprietorship (partnerships).7. In what ways do small businesses contribute to our economy and society?8. Evaluate the economic and social contribution of small businesses in the United States and in Russia. 9. Give examples of the most typical small business firms.

For your notes:

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UNIT III LARGE - SCALE BUSINESS

Glossarystock основной акционерный капитал, акция

common stock обыкновенная акция

preferred stock привилегированная акция

to restrict ограничивать

to entitle давать право

to transact вести дела, заключать сделку

earnings поступления, доход

annual ежегодный

board of directors совет директоров

charter устав

legislature законодательная власть

to vote голосовать

to pool объединять в общий фонд

to raise capital/funds находить источники финансирования,

привлекать средства

principal капитал; сумма, на которую начисляются

проценты

interest rate=interest процентная ставка

prospectus проспект эмиссии

hire-purchase аренда с последующим выкупом

to lease арендовать

underwrite an issue гарантировать выкуп акций

Ex . 1 Arrange these words into groups according to some principle. As long as you have a good reason, there may be several principles of grouping. Translate the words.

To restrict, transaction, annual, fulfilment, to pool, holder, treatment, to pay, liable, annually, restrictive, to fulfil, routine, participation, liability, to charter, a pool, to treat, routinely, to hold, a vote, payment, to proceed, to participate, charter, restriction, to vote, to transact, proceeds.

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Ex. 2 Explain the grammatical phenomenon common for the following sentences. Translate them.

1. The ownership of the corporation is divided into a specified number of shares of common stock, each share representing equal participation in the affairs of the firm.

2. Control of the corporation is centralized in a board of directors, elected at the annual stockholders' meeting, each share of stock having one vote.

3. If the corporation cannot fulfil its contracts or pay its debts, it can be sued like a person, its property being taken in payment.

Ex. 3 While reading the texts of this unit write down all the sentences with the words "like", "unlike". Translate them.

Assignments to text 1:

1. Look through the text and formulate the main ideas.2. Read the text and divide it into some parts. Give reasons for your division.3. Find definitions of a corporation.4. Read the text once more and find the sentences which explain why corporation is a “legal person”.5. Translate the text paying particular attention to grammar.6. Draw a chart which would reflect the classification of corporations as it is described in this text. What country can one refer this classification to? Find the sentences which indicate reference to a certain country.

Text 1 The Corporation

The corporation is a legal form of enterprise designed to take advantage of large-scale production methods by pooling the wealth of many people into a single enterprise while at the same time maintaining centralized control over, and responsibility for operations. Unlike partnerships, which are established by private agreement among the partners, a corporation can be established only by a charter from the state. Indeed, in the days when most farming, manufacturing, and commercial businesses were small enough to be carried on as proprietorships and partnerships, corporate charters were issued only by а special act of the state legislature. The corporation was looked upon as a very special form of business organization largely restricted to such enterprises as canal and railroad companies, for which huge agglomerations of wealth were essential. With the development of mass production technology and increase in the amount of capital needed for efficient operation, the economic advantages of the corporate form grew rapidly.

When a corporation is established by a small group of owners, the owners merely contribute funds or property to the newly chartered company in exchange

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for shares of stock. However, it’s a promoter who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish this purpose. A promoter is anyone who participates or has an interest in setting up the company, but not someone involved in a purely professional capacity, such as a lawyer. The promoters are often the company’s first directors. When funds are to be raised from a large number of people, the frequently informal arrangements between promoters may not suffice. The first step for the promoters then is to formally register, or incorporate the firm. Nowadays in the USA corporate charters are issued usually by state bureaus.

Corporation is a legally chartered organization that is a separate and legal entity apart from its owners. Since the corporate charter establishes the corporation as a legal entity distinct and separate from its owners, the corporation is said to be a “legal person”. That is, the firm itself is legally treated like a person and can make contracts in its own name and can sue and be sued like a real person.

Corporations can be classified as domestic, foreign, or alien. A domestic corporation is one that is incorporated in the state that is doing business. In other states where it plans to do business, it must register as a foreign corporation. If it plans to do business in another country, it must be registered as an alien corporation.

Corporations owned by a very small number of shareholders are called close. A close corporation is one that is privately held. That is, its stock is not traded on the stock exchanges and all the stock is held by a relatively small number of people. On the other hand, an open corporation is owned by a large number of shareholders. These corporations are also referred to as publicly held or public corporations. The stock of these corporations is traded publicly on stock exchanges.

The phrase «going public» indicates a situation where private corporations offer shares of stock for sale to the general public in the hope of raising money to finance growth. The opposite of this action is indicated by the phrase «taking a corporation private». This means one or a few shareholders or corporate officers buy the stock owned by other shareholders, and a formerly open corporation becomes a close corporation. Acting like that they make a formally “open” corporation a “close” one.

Assignment to text 2:

1. Read the text and explain the meaning of the word “flotation”.2. Look through the text once more and find the words or word-combinations

which would substitute the word “flotation” and word-combination “raising finance”.

3. What types of securities are described in this text?

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4. Divide the text into some logical parts. Mark the key sentence for every paragraph. Make annotation of the text using the following key-patterns: The article deals with… As the title implies the article describes… It is specially noted… … is discussed in detail. Much attention is given to… It should be emphasized that… The article gives a detailed analysis of… It draws our attention to… The text gives valuable information on… The text is of great help to… The article is of interest to…

Text 2 Flotation. Raising Finance

A company may finance its activities in a number of ways. It could simply obtain an overdraft from its bank. It could buy equipment on hire – purchase terms or lease it.

For borrowing of substantial sums and/or for long-term borrowing, it will often issue bonds (debentures-Br) at a fixed rate of interest; their attraction will depend on their tax advantages and a comparison of levels of income derivable from interest rate and dividends on shares.

Initial finance for most companies is provided by shares. The act of issuing shares (GB) or stocks (US) for the first time is known as floating a company (making a floatation). A company may issue shares by various methods: it could invite tenders or subscriptions directly from the public (usually through the agency of an investment bank (issuing house)). It might sell them to the investment bank, for it to resell them to the public, by issuing a prospectus or inviting subscriptions or it might place them with the investment bank, either for sale and resale to selected clients of the investment bank or for inviting clients to subscribe. The investment bank is rewarded by its profit on resale or by commission especially where it underwrites an issue. Any commission for underwriting an issue must not exceed 10 per cent.

There are 3 basic types of securities: common stock/ shares, preferred stock/shares, and bonds. Common stock is shares of ownership in a corporation. Preferred stock is shares of a corporation that usually do not confer voting rights but do give preference with respect to dividends and assets. Bonds are written promises that the borrower will pay the lender at some stated future date, a sum of money (principal) and the stated rate of interest. Before buying stocks and bonds, you must understand the pricing of stocks and bonds, which are reported, in many daily newspapers.

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Assignment to text 3:

1. Read and translate the headline. What information do you expect to find in the text?

2. Read the text. Have you found anything beyond your expectations?3. Make up an outline of the text supplementing every item with key words

and word combinations.4. Find the sentences which describe advantages of a corporation.5. Taking advantage of the text give different definitions of a share.6. Translate the text.

Text 3 Becoming a Shareholder

A person may become a shareholder by subscribing to the memorandum and having one or more shares allotted to him, or by having shares transferred to him by an existing shareholder, or by applying for shares and having them allotted to him.

The ownership of the corporation is divided into a specified number of shares of common stock, each share representing equal participation in the affairs of the firm. The owners of the company called common shareholders or common stockholders receive certificates of common stock or shares in proportion to their participation in the firm. A man who invests 10 percent of the total capital receives 10 percent of the common shares. Each share entitles its holder to participate in the earnings of the firm in common with their shares. For example when there are 100,000 shares, each share is entitled to one hundred- thousandth of any earning. Also, each share entitles the owner to one vote in the annual stockholders meeting. So, a share is an item of property and normally freely transferable. It gives its holder an interest in the company measured by a sum of money and entitles him to the rights contained in the articles. The value of shares is generally their market price.

Basically, there are three values considered in assessing common stock: book value, market value, and par value. Book value is the difference between the assets of a company and what a company owes (its debts and liabilities) divided by the number of shares of common stock. Market value is the price the shares are selling for on the stock market. Par value is the value the corporation originally printed on each stock certificate.

By pooling together the individual contributions of a large number of stockholders - often hundreds of thousands - a corporation can accumulate immense amounts of capital. It is free of the size limitations of the proprietorship

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and the partnership and can grow as large as the most efficient production technique requires.

Assignment to text 4:

1. Look through the text and explain the interconnection between the title and subtitles of the text. Suggest your own headline for the text.

2. Read the text and find the sentences which focus on differences in forms of businesses.

3. Find the sentences which describe functions of a board of directors.

4. Read the paragraph about limited liability of stockholders. Try to reduce the paragraph to 2-3 sentences which would explain the notion of limited liability of stockholders.

Text 4 Organization of the Corporation

Directors and Management. In a partnership, any individual partner can transact business for the firm. In small corporations the major shareholders often manage the business but in large corporations with thousands of shareholders such an arrangement would lead to immediate chaos and a breakdown of operations. Instead, control of the corporation is centralized in a board of directors elected at the annual stockholders' meeting, each share of stock having one vote. The board elects its own officers which include a chairperson, vice-chairperson, and a secretary. The board holds periodic meetings, typically once a month. The board of directors acts on behalf of the stockholders to set corporate policy, to make major decisions, and to hire management to carry on the day-to-day operations of the firm.

Profits and dividends. The profits from the operation of the firm accrue to the equity of the stockholders, and are distributed by the board of directors. The board decides how much of the profit is to be paid out to shareholders as dividends. The remainder of the profits constitutes retained earnings and is reinvested in the firm, thereby increasing the stockholders' equity.

Limited liability of stockholders. In a partnership, all agreements entered into or debts contracted by the firm are personally binding on all the partners. Since the shareholder has given up all immediate control over the corporation, he must be protected in some degree from liability for its actions. This is done by defining a limit to the liability of the individual stockholder.

Agreements and debts contracted by the directors and management are binding on the corporation, but not on the shareholders personally. If the corporation cannot fulfil its contracts or pay its debts, it can be sued like a person and like a person its property can be taken in payment. The stockholder can lose

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all he has invested in the company, but he has no personal liability beyond this. As an individual, he is in no way responsible for the debts of the company. This aspect of corporate organisation is called limited liability.

Discussion

These are some useful word-combinations in addition to the glossary that you will translate, memorize and use while discussing the problems:

To take advantage of (smth.), to maintain control, to develop mass-production technology, to issue corporate charter, to make contracts in one's name, to give up control, to fulfil contracts, to pay debts, to take in payments, to pool wealth (capital), to establish a corporation, to have an independent legal personality, to sue, to finance activities, to obtain an overdraft, to borrow money, to issue bonds/shares, to invite tenders, to confer voting rights, to give preference, to subscribe to the memorandum, to receive certificates of stock, to accumulate capital, to transact business, to act on behalf of (smb.), separate and legal entity, legal person, initial finance.

1. Discuss the main differences between corporations and small businesses. Use the table provided.

2. Is being a director the same as being an entrepreneur?3. What types of securities have you learnt from this unit? Explain the

difference between them.4. What benefits can you expect being a shareholder?5. What is a corporation? How does a corporation finance its activities?

For your notes:

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Form of Ownership Advantages DisadvantagesSole proprietorship -Simple to start

-Proprietors own all profit-Personal satisfaction-Sole decision maker-No tax on business as distinct from owner-Easy to dissolve

- Unlimited financial liability- Hard to raise funds for expansion-Often have no one to share management burden

Partnership- Few restrictions on starting- Pooling of funds, talents and borrowing power- More chance to specialize than the sole proprietor-Personal satisfaction-No tax on business as distinct from owners

- Unlimited and joint financial liability-Potential for personal disagreements-Relative impermanence- Frozen investment

Corporation -Separate legal entity-Limited financial liability of owners- Easy transfer of ownership- Greater financial capability- Permanence

- Special and double taxation- Complex and costly to form and dissolve-Government regulation and public disclosure requirements

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UNIT IV CORPORATE FINANCE

Glossarystock exchange биржа

to transfer перемещать, перечислять суммы

to sustain(losses) потерпеть (убытки)

to tap capital зд. наращивать капитал

return оборот, прибыль, доход

cumulative накопленный, совокупный, кумулятивный

arrears (pl) задолженность, долг.

to recover получать обратно, возмещать, покрывать,

взыскивать, инкассировать

to repay возвращать (долг), возмещать (ущерб),

оплачивать

leverage повышение доходности, использование

заемных средств для получения

дополнительного дохода, «плечо»

income доход

fluctuation колебание, неустойчивость

utilities (pl.) предприятия общественного пользования

power utilities энергетические сооружения (услуги)

public utilities коммунальные сооружения (услуги)

IOY=I owe you долговая расписка

share capital акционерный капитал (сумма номинальных

стоимостей всех акций)

issued share capital выпущенный акционерный капитал

collateral залог

indebtedness задолженность, сумма долга

Ex.1Consult a dictionary and write down all the meanings of the word “security”. Find the most suitable for the texts of the unit.

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Ex . 2 Translate the following words. Explain the meaning of –er/-or.Creditor, investor, owner, promoter, bondholder, shareholder, stockholder,

director, manager, enterpriser, banker, producer, manufacturer, adapter, air-conditioner, undertaker, debtor, sponsor, organiser.

Ex. 3 In each group of five words decide which one is the odd-man-out. As long as you have a good reason, there may be more than one odd-man-out in each group.

1. has is being am were2. he it we our I3. share market furniture proprietor business4. buy go must know say5. and because if but how6. buy sell impose price lose7. them us her him she8. partnership company limited firm business9. am had will was would

Ex.4 Complete the sentences using the following words:Legislation, shares, bonds, instructions, directives, order, decree

Companies issue …………. ….. to attract more capital.Companies issue … …………….. to borrow large sums for a long term.Corporate boards issue …………..... to the management.Parliament issues …………………. to improve the legal framework for the national economyPresident issues …………………... to convey his decisions to the nation.The general issued an ………………. to start an attack.The CEO has issued new …………………. to the division managers.

Ex.5 After reading the texts of this unit, complete the sentences, suggest as many versions as you can:

1. А bank can issue a loan to a company provided ….2. Preferred shareholders can vote at general shareholder meetings provided...3. Common stockholders receive dividends provided …4. Company directors declare dividends provided …5. Shares may be issued at a premium provided …6. Stockholders may be held liable to the amount invested provided …7. Distributions to shareholders are made out of profits provided ….8. A person may become a shareholder provided …9. A person is issued a share certificate provided ….

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10. Investors may prefer bonds to shares provided …11.Bondholders receive interest provided…

Assignment to text 1:

1. Read the text and find the definition of “capital”.2. Find the sentences which describe different types of capital.3. Look through the text and find all the words which are somehow connected

with the word “capital”.4. Find Russian equivalents for the words printed in bold.

Text 1 Capital

In order to operate and develop a company needs capital. Capital is the money that the company uses to run and develop business. There are two main ways in which a company can raise capital, that is find the money it needs: it can use share capital or loan capital, from investors. These are people or organizations who invest in the company; they put money in hoping to make more money.

Share capital is contributed by shareholders who put up money and hold shares in the company. Each share represents ownership of a small proportion of the company. Shareholders receive periodic payments called dividends, usually based on the company’s profit during the relevant period. Capital in the form of shares is also called equity.

Investors can also lend money, but then they do not own a small part of the company. This is loan capital, and an investor or financial institution lending money in this way is a lender. The company borrowing it is the borrower and may refer to the money as borrowing or debt. The total amount of debt that the company has is its indebtedness. The sum of money borrowed is the principal. The company has to pay interest, a percentage of the principal, to the lender, whether it has a profit in the relevant period or not.

Many companies have both loan and share capital. The amount of loan capital that a company has in relation to its share capital is its leverage. Leverage is also called gearing in BrE. A company with a lot of borrowing in relation to its

Lenders

Company

ShareholdersShare capital

Loans

Dividends

Repayments and interest

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share capital is highly leveraged or highly geared. A company that has difficulty in making payments on its debt is overleveraged.

Assignment to text 2:

1. Look through the text and formulate the main issues of it.2. Make an outline of the text. 3. What are the main types of corporate finance?4. Find the sentences which explain the differences between the types of

finance.5. Look through the text once more and enumerate advantages of debt

financing. Contrast them to advantages of equity financing.6. Translate the text.

Text 2 Corporate Finance

Firms need short-term, intermediate-term and long-term finance. The two main choices for long-term finance are debt or equity finance. Debt finance can be raised in two main ways: long-term loans from banks and bonds (also known as loan stock or corporate bonds). Bonds are also called debentures in Great Britain.

Equity finance is sale of shares. Which method of long-term finance should a company choose? There is no easy answer to this question. Some businesses will use both debt and equity finance for very large projects.

Debt financing has the following advantages:- As no shares are sold, the ownership of the company does not change or is

not «diluted» by the issue of additional shares.- Loans will be repaid eventually, so there is no permanent increase in the

liabilities of the business.- Lenders have no voting rights at the annual general meetings.- Interest charges are an expense of the business and are paid out before

corporation tax is deducted, while dividends on shares have to be paid from profits after tax.

- The leverage of the company increases and this gives common shareholders the chance of higher returns in the future.

Equity capital has the following advantages:- It never has to be repaid; it is permanent capital.

Dividends do not have to be paid every year; in contrast, interest on loans must be paid when demanded by the lender.

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Assignments to text 3:

1. Read the text and say what types of securities are compared.2. Find definitions of different securities.3. Look through the text and find the sentences explaining advantages and

disadvantages of being a bondholder/ stockholder.4. Translate the text.

Text 3 Types of Securities

A company wishing to raise funds will issue or sell not only common stock but also preferred stock and bonds (debentures). There is a certain difference between these 3 types.

Common stock is shares of ownership in a corporation. As owners of the firm, common stockholders stand to make good profits when the firm is successful, but will sustain losses when business is poor.

Common stockholders are often named the residual owners. They are so named because they have the right to residual earnings of the corporation. If a corporation were to go bankrupt, the common stockholders would be the last to receive any proceeds from the sale of the corporation’s property. This is because all other creditors, bondholders, and preferred stockholders must be paid first. What is left is considered residual earnings. Common stockholders are paid out of these residual earnings if dividends are declared by the board of directors.

Some investors prefer to give up the chance of a higher return in exchange for greater security in the event of low earnings or losses. One way to tap capital held by such people is to offer them preferred stock (or preferential-British English).

Preferred stock is, like common stock, a share in the ownership of the company but instead of equal participation in the profits, preferred shares carry fixed annual dividends that must be paid before dividends can be declared on a common stock. There are many different types of preferred stock but most are cumulative. That is, if the fixed preferred dividends are not paid in a given year, they accumulate, and all arrears must be paid before any dividends can be declared on common stock.

In exchange for this preferred dividend position, preferred stockholders give up the chance of participating in management. Nevertheless, they are still owners. They have no claim on the firm, in the event of liquidation they must wait, like other owners, until all creditors are paid off. If any ownership equity remains after the creditors are paid, the preferred stockholders are entitled to recover their equity before the common stockholders.

Bonds/Debentures. Lending to companies is often in the forms of bonds or debentures, loans with special conditions. One condition is that the borrower must

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have collateral or security: that is, if the borrower can not repay the loan, the lender can take equipment or property, and sell it in order to get the money back. This may be an asset which was bought with the loan. Some corporations borrow money for long periods by issuing bonds. Bonds are corporate IOYs that promise to pay a specified annual rate of interest and to repay the borrowed principal (a sum of money) on a specified date.

Bond interest and principal are contractual claims against the firm and must be paid whether the firm makes profit or not. If payments are not made on time, the bondholders can sue the firm to collect.

The use of bonds makes it possible for a firm to borrow large amounts of money from a number of small creditors on a long-term basis. Instead of a series of bonds for a number of separate debts, a company may create one fund of bonds and issue certificates for particular divisions of the fund. In simpler words, it breaks up the debt into small units, just as issuing stock breaks up the ownership equity. Certain kinds of firms, most notably public utilities, raise more of their capital by bonds than by stocks.

In many ways, a bondholder is as much an investor as a shareholder. But a shareholder is a member of the company whereas a bondholder is a creditor, whatever the similarities or dissimilarities between the rights and obligations of the two.

Whereas the articles of association can be varied, the rights of bondholders are fixed by the contract of loan and any attempted variation of them by the company (other than under a compromise or arrangement) will be a breach of contract.

The law governing the transfer of the securities held by shareholders and bondholders is basically similar, apart from the fact that bonds must be transferred as a whole (therefore there is no need to certify transfers of them) and are generally transferable without limitation. In other respects, the law differs.

Assignment to text 4:

1. Read the text and write down all the key terms.2. Answer the following questions:

What is a dividend? What is retained earnings? What can the shareholders benefit from?

Text 4 Share capital. Transferability

Share capital may be nominal capital, i.e. the amount of money which a company’s memorandum entitles the company to raise. This may comprise issued share capital (the shares actually issued) and unissued share capital. Paid up capital

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represents the money actually received from share issued and uncalled capital the amount still owed. Reserve capital is uncalled capital which the company has resolved only to call up on liquidation. Most shares today are fully paid up and often worth more than their nominal value.

The profits from the operations of the firm accrue to the equity of the stockholders, and are distributed by the board of directors. The board decides how much of the profit is to be paid out to shareholders as dividends. A cash dividend is a cash payment to shareholders. A stock dividend is a payment to shareholders of additional shares of stock rather than cash. The remainder of the profits constitutes retained earnings and is reinvested in the firm, thereby increasing the stockholders equity.

The shareholders benefit from becoming a member of a limited liability company. A share is normally transferable, and individual shareholders can transfer their shares of corporate ownership merely by selling their stock to somebody else. Organized stock exchanges permit the transfer of the stocks of many corporations in a matter of hours. This easy transferability permits many investors to participate in corporate ownership. The stockholders benefit from being able to trade with their liability limited to the value of their shares and they may be able to obtain tax advantages from investing in this form of business. For persons who merely wish to invest in, rather than to participate in the running of, a business enterprise, it is convenient to put their money into a company, the day-to-day activities of which can be carried on by an appointed board of directors.

Assignment to text 5:

1. Read and translate the title.2. Read the text and find the sentences which would help to give a definition of

“leverage”.3. Look through the text paying attention to all figures. What is their function?4. Translate the text.

Text 5 Leverage

When part of a firm's capital is raised through preferred stocks and bonds, fluctuations in total earnings have a magnified effect on the income of common stockholders. This phenomenon called leverage arises because preferred stocks and bonds are fixed income securities. Leverage is best illustrated by example. Suppose a corporation's ownership equity of $10 million consists entirely of 100,000 shares of common stock. Since they are not fixed income securities, earnings per common share vary exactly in proportion to total earnings. Total earnings of $500,000 would be $5 per share. If total earnings doubled to $1 million, earnings per common share would likewise double to $10. If earnings

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shrank 80 percent from $500,000 to 100,000, earnings per common share would likewise decline 80 percent from $5 to $1.

Now suppose, however, the same corporate ownership consists of 5 million of 5 percent preferred stock and $5,000,000 divided into 50,000 shares of common stock. Regardless of total earnings, the preferred stock is entitled to dividends of $0,05 × 5 million or $ 250,000. This fixed income gives leverage to the common stock. Thus, when total earnings are $500,000, preferred stockholders receive $250,000, leaving $250,000, or $5 per share of common stock, just as before. But when total earnings double to $1,000,000, the leverage provided by the fixed income securities triples the earnings per common stock share. Preferred stockholders still get only their $250,000, leaving earnings of $750,000, or $15 per share, to the common stock. Unfortunately, leverage also works when earnings decline. Should total earnings fall to $100,000, preferred stockholders would still be entitled to their fixed $250,000. This would leave common stockholders a loss of $ 150,000, or $3 per share, despite the positive total earnings made by the company.

Discussion

These are some helpful word-combinations to translate, memorise and use while discussing the texts.

To transfer shares, to sell/buy stock, to make (good) profits, to sustain losses, to tap capital, to raise funds/ capital, to issue bonds, to pay an interest rate, to repay principal, to carry dividends, to forego the chance of, to recover equity, to borrow money, to benefit from, to give up the chance of, to declare dividends, to be entitled to.

1. Now you know the main kinds of securities. Explain the difference between common stock, preferred stock and bonds. What is their role in organisation of the corporation?

2. What shares of what enterprises of your town would you buy? Give your reasons.

3. Your business is going to raise funds by borrowing. What should you do for that? Would you like to be a securities dealer? What should you know to become a dealer?

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UNIT V THE SECURITIES MARKET AND REGULATION

Glossaryсash наличные деньгиsuffice быть достаточным, хвататьto retail продавать в розницуat retail в розницуat wholesale оптомto issue выпускатьholding вклад, пакет (ценных бумаг)lack of smth. недостаток, нехваткаto lack smth. испытывать недостатокto encourage поощрять, поддерживатьpending рассматриваемый,

находящийся на обсужденииto disclose освещать, раскрыватьclaim иск, претензияto underwrite гарантировать выкуп ценных бумагoutstanding нереализованный,

выпущенный в обращениеremuneration вознаграждениеtransaction сделка

Ex.1 Building your business vocabulary is very important. Some new business terms introduced in this unit are printed below, along with definitions. Please match each with its proper definition after reading the texts of this unit.

a) securities exchangeb) bear marketc) cash dividendd) securities markete) bull marketf) brokerage houseg) speculative tradingh) prospectus

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1. The millions of people and organization that buy stocks and bonds and the securities intermediaries who bring buyers and sellers together.

2. A cash payment to shareholders. 3. A firm that buys and sells securities on behalf of its investor-clients.4. An institution set up by brokers at a permanent location for buying

and selling securities.5. A summary of the securities registration statement that is filed with

the SEC; it contains information about the firm’s operation and management, the purpose of the proposed issue, and anything else that would be helpful to potential buyers of securities

6. The buying and selling of securities in the hope of profiting from near term changes in their prices.

7. A stock market in which prices are falling, and there is pessimism among speculators.

8. A stock market in which prices are rising and there is much optimism.

Assignments to text 1 :

1. Read the text and write down into your notebook the English equivalents for the Russian “потенциальный акционер/покупатель”.

2. Read the first paragraph and try to formulate the main idea, give the subtitle to it.

3. Read the second paragraph, and explain how the main idea of the first paragraph is developed.

4. Look through the 3rd paragraph and explain in what connection non-financial terms “retail” and “wholesale” are used.

5. Translate the text.

Text 1 Investment Banks

When a corporation is established by a small group of investors, the owners merely contribute cash or property to the newly chartered company in exchange for shares of stock. When funds are to be raised from a large number of people, however, this informal arrangement will no longer suffice. The people founding or promoting the corporation do not know who the would-be shareholders are. Nor can the prospective buyer of only a few shares of stock afford to spend time and money hunting for a company in which to invest. Bringing would-be investors and investment opportunity together is the job of the specialized financial institution called an investment bank.

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Investment banks are what might be called "retailers" of corporate securities. They take blocks of stocks or bonds from the corporation "at wholesale" and break them into smaller holdings to sell "at retail" to the final owner. The investment bank collects a commission for performing this service. The same procedure is followed when an existing corporation issues new shares to increase its capital by expanding its ownership. Advertisements by investment banks announcing the availability of new issues of securities are often seen in the financial pages of newspapers.

Investment banks help small companies “go public”. That is, they help businesses that want to sell shares of stock to the public. The investment bank must decide whether it will underwrite the new public offering of stock. Underwriting means that the investment bank guarantees to purchase the stock. The investment bank then contacts various brokerage houses. Brokerage houses are firms that buy and sell securities on behalf of their investor-clients. They explain the offering to them. So, investment banks deal with both individuals and brokerage houses.

Thus, an investment bank is a financial institution that does not accept deposits from the general public but instead helps firms sell new issues of stocks and bonds. They also help firms to acquire other firms or to be acquired.

Assignments to text 2:

1. Look through the 1st paragraph and explain what the word combination “blue sky laws” means.

2. Read the second paragraph. Find the word "these" in it; indicate the nouns it stands for.

3. Read the text and prove by the facts that information has a high price.

4. Find and translate the paragraph in which the functions of SEC are described.

5. Read the text once more and say if the securities market is safe in the USA.

Text 2 Securities Regulation

State and federal laws in the USA regulate both the insurance and the trading of securities. At the state level there exist blue-sky laws. Blue-sky laws are state laws that force corporations to give potential investors certain facts about the securities. Their purpose is to prevent corporations from issuing worthless securities to unsuspecting investors (selling them “the blue sky”). At the federal level the Securities Act of 1933 protects the public from interstate sales of fraudulent securities.

The Securities and Exchange Commission. The buyer of a security invests his wealth to become one of the owners of the firm. Yet he is often remote from the

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actual operation of the company, and may lack the information necessary to make a sound judgement concerning the investment. Frequently all he knows about the company and its prospects is what the management or the investment banker tells him. Since these have special interest in encouraging him to buy the stock, he needs some assurance that he is being told everything he needs to know.

Making sure that perspective stockholders are fully informed is one of the duties of the Securities and Exchange Commission (SEC), a federal agency established by the Securities Exchange Act of 1934. Before a corporation can offer a new issue of securities for sale to the public, it must file a registration statement and a prospectus with the Commission. The registration statement must disclose such matters as “the names of the persons who participate in the management or control of the business; the security holdings and remuneration of such persons; the general character of the business, its capital structure, past history and earnings; underwriters' commissions; payment to promoters made within 2 years or intended to be made; the interests of directors, officers and principal stockholders in material transactions; pending or threatening legal proceedings; the purpose to which the proceeds of the offering are to be applied; and financial statements certified by independent accountants." The prospectus is part of the registration statement and embodies the more important of the required disclosures.

The SEC staff examines the registration statement and prospectus for accuracy and completeness. Unless it is found to be misleading, inaccurate, or incomplete, the registration becomes effective, and the security can be offered for sale.

Assignments to text 3:

1. Read the text.2. Find the key sentences in every paragraph.3. Find answers to the following questions.

What is the function of a stock market? What are the main players in a stock market? What stock markets are described? What is the difference between the two types of the stock market?

4. Identify all the definitions in the text.5. Find the sentences which explain regulations for stock exchanges.

Text 3 The Stock Market

A stock market consists of brokers, dealers, and organized exchanges whose function is to facilitate the transfer of securities from one private owner to another. The corporation itself is not a party to transactions in its securities on the stock

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market, nor are stock markets places where corporations raise capital. The function of the stock market is, rather, to provide the easy transferability of ownership that characterizes the corporate form of business organization.

There are two distinct types of stock market. (1) Securities that are less frequently traded are generally bought and sold through the facilities of the over-the-counter market. (2) The organized stock exchange is set up for the purchase and sale of a selected list of securities that are usually traded in large daily volume.The Over-the-counter Market

Once a stock or bond has been issued, its owner is entitled to sell it to anybody else, at any time, at any price that can be agreed on. The transaction can be completed privately, but most people enlist the services of a specialized middleman. An over-the-counter dealer plays essentially the same role in the securities market that a used car dealer does in the used car market. He buys securities from individual owners for resale to others at slightly higher prices, getting his commission from the difference between the buying and the selling prices. Since over-the-counter dealers are organized into a National Association of Security Dealers, there is a nationwide competitive market. Most securities are unlisted. Quotations of security prices being paid (bid) and charged (asked) by dealers are published in the daily financial pages.Organized Stock Exchanges

As in any other part of the economic system, greater specialization in securities trading is possible in more extensive markets. Securities that are bought and sold in large volume every day are traded through highly organized special markets called organized stock exchanges.

A stock exchange (or a securities exchange) is an institution set up by brokers at a permanent location for buying and selling securities. The securities bought and sold at these exchanges are called listed securities.

An organized stock exchange is an institution with a limited membership, whose members are permitted to trade securities with each other. Since only members are permitted to conduct business on the exchange, others who want to buy or sell in this way must employ members to act on their behalf.

Trading among members of each exchange is restricted to a special list of securities and the stocks and bonds of corporations not listed on the exchange cannot be bought or sold there. Each exchange has established rules governing which securities can be listed for trading. Among other requirements, securities are listed only if they are traded in sufficient volume to make it worthwhile. In addition, before a security can be listed, it must have been outstanding long enough to have «seasoned». Securities of young companies, for example, are not listed. Moreover, the listed corporation must agree to file certain reports with the SEC (Securities and Exchange Commission).

There is an organized stock exchange in almost every major U.S. city, but most of these are small and limit their lists largely to the securities of local firms.

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The securities of most large, nationally known corporations are traded on the two large New York exchanges: the New York Stock Exchange and the American Stock Exchange.

The New York Stock Exchange (NYSE) is the most important U.S. Securities exchange and one of the three largest exchanges in the world. The American Stock Exchange (AMEX) is also a national exchange, but it is smaller than NYSE.

Text 4 Learn How to Read a Stock Price Quotation

Stock and Bond prices – the prices of stocks and bonds on the securities exchange and the over-the-counter market are reported in many daily newspapers.

Stock Prices - several important kinds of information are presented in a stock quotation.

1. The stock quotation usually starts with the stock’s 52 week high and low.2. The stock’s name is then presented in abbreviated form.3. Next is shown the annual dividend and then the yield (interest rate) the stock

is paying.4. Next is the price earnings ratio and then the total number of shares traded.5. The next two columns typically show the high and low price on the date

shown and the closing price.Bond Prices are expressed in terms of 100, although most bonds have a par

value of $1000.Stock and Bond prices Averages—lists show the average price of a group of

stocks or bonds.

Assignment to text 5:

1. Read the text given in a jumbled order and put the paragraphs in the correct order.

2. How many logical parts can you distinguish?3. Match the following headings with the parts:

Don’t make a costly mistake!Why are the pyramid schemes dangerous?What is a pyramid scheme?How does the pyramid work?

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Text 5 The Pyramid Scheme.Don`t make a costly mistake!

- Thousands of Americans have lost millions of dollars participating in pyramid schemes. Many of the victims knew they were gambling (although they didn’t know the odds were rigged against them). Many others, however, thought they were playing for help in starting a small business of their own. These people were fooled by pyramid schemes disguised to look like legitimate businesses.

- In reality, however, the supply of participants is limited, and each new level of participants has less chance of recruiting others and a greater chance of losing money.

- Things you should know about pyramid schemes: There are losers. Pyramiding is based on simple mathematics: many losers pay a few winners. They are fraudulent. Participants in a pyramid scheme are, consciously or unconsciously, deceiving those they recruit. They are illegal.

- To join, you might have to pay anywhere from a small investment to thousands of dollars. For example, $1000 buys a position in one of the boxes on the bottom level. $500 of your money goes to the person in the box directly above you, and the other $500 goes to the person at the top of the pyramid, the promoter. If all the boxes on the chart fill up with participants, the promoter will collect $16000, and you and the others on the bottom level will each be $1000 poorer. When the promoter has been paid off, his box is removed and the second level becomes the top of payoff level. Only then do the two people on the second level begin to profit. To pay off these two, 32 empty boxes are added at the bottom, and the search for new participants continues.

- Of course, the pyramid may collapse long before you reach the top. In order for everyone in a pyramid scheme to profit, there would have to be a never-ending supply of new participants.

- Each time a level rises to the top, a new level must be added to the bottom, each one twice as large as the one before. If enough new participants join, you and the other 15 players in your level may make it to the top. However, in order for you to collect your payoffs, 512 people would have to be recruited, half of them losing $1000 each.

- The purpose of this discussion is to help you avoid falling victim to pyramid schemes, whether simple or disguised. Simple pyramid schemes are similar to chain letters, while disguised pyramids are like wolves in sheep’s clothing, hiding their true nature in order to fool potential investors and evade law enforces. What is a pyramid scheme?

- Pyramid schemes are illegal scams in which large numbers of people at the bottom of the pyramid pay money to a few people at the top. Each new participant pays for the chance to advance to the top and profit from payments of others who might join later.

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Discussion:

These are some helpful word-combinations in addition to the glossary that you should translate, memorise, and use while discussing the texts:

to contribute cash, to raise funds, to spend time and money, to make a sound judgement, to collect a commission, to follow a procedure, to examine for accuracy, to take at wholesale, to sell at retail, to perform a service, to disclose information, to lack information, to offer for sale, to become effective, to contact brokerage house (broker), to complete a transaction.

1. Discuss the functions and the role of investment banks.2. Explain what SEC is and its role in business.3. Draw a line of comparison between the American securities market and

the Russian one. 4. What do you think about the system of securities regulation in the USA

and in Russia? Compare the systems.5. Investigate securities scandals in the USA and Russia. Include in your

report the background of each, how the business was organized, for how long the pyramid existed.

For your notes:

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UNIT VI EVALUATING PERFOMANCE OF THE FIRM

Glossaryto evaluate оценивать

account счет (банковский)

accounts (pl.) расчеты, отчетность, сводка

accounts receivable (AmE)= счета дебиторов (в балансе),

debtors (BrE) дебиторская задолженность (сумма),

счета к получению

accounts payable (AmE)= счета кредиторов (в балансе),

creditors (BrE) кредиторская задолженность (сумма),

счета к оплате

accountant бухгалтер

accounting бухгалтерский учет

balance sheet балансовый отчет

bill счет (к оплате), вексель

excise акциз, акционерный сбор, лицензия

income statement отчет о доходах

liabilities денежные обязательства

assets and liabilities активы и пассивы

intangible assets нематериальные активы

tax налог

depreciation амортизация, снижение стоимости

permanence неизменность, прочность

постоянство

entry бухгалтерская проводка, запись

expense account cчет подотчетных сумм

petty cash мелкие суммы,

статьи (прихода,расхода)

payroll фонд зарплаты (предприятия)

receipt расписка в получении, квитанция

invoice счет-фактура,(товарная) накладная

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Ex. 1 Translate the following word combinations. Mind the model "Noun +Noun+(Noun)”.

business firm, market value, retail trade, wholesale trade, revenue service, business tax, company reputation, cash assets, bank account, cash reduction, profits tax, unit cost; production-line economy, mass-production technique, income tax return, production-line basis, business opportunity, payment terms.

Ex. 2 Read and translate the following definitions. Find Russian equivalents for the underlined words.

An asset is something that has value, or the power to earn money. These include:

1. current assets : money in the bank, investments that can easily be turned into money, money that customers owe, stocks of goods that are going to be sold.

2. fixed assets : equipment, machinery, buildings and land.

3. intangible assets : things which you cannot see. For example, goodwill: a company's good reputation with existing customers, and brands: established brands have the power to earn money.

Liabilities are a company's debts to suppliers, lenders, the tax authorities, etc. Debts that have to be paid within a year are current liabilities, and those payable in more than a year are long-term liabilities, for example bank loans.A company's balance sheet gives a picture of its assets and liabilities at the end of a particular period, usually the 12-month period of its financial year. This is not necessarily January to December.

Ex. 3 Make sure you remember the following words. Pay attention to the sentences with these words to see how to use them correctly.

income – доход, приход (за какой-либо период)revenue – доход, источник дохода, (множ.) доходные статьи.receipts – денежные поступления, выручка, доходearnings – заработок, трудовой доход, доход, прибыль,

поступления

Ex. 4 Building your business vocabulary is very important. Some new business terms introduced in this unit are printed below, along with definitions. Please match each with its proper definition after reading the texts of this unit.

a) asset b) liability c)owner's equity d) balance sheet e) capital stock f) retained earnings g) revenues h) expenses i) income statement g)current liability k) accounting .

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1. A financial statement that shows what a firm owns, what it owes, and what the owner's equity is worth at a given point of time

2. A claim held by someone against a firm's assets.3. A financial statement that summarizes revenues, expenses, and net profit

or loss.4. The original investment of the stockholder-owners. 5. The amount of resources used by a firm in the pursuit of revenues, 6. Whatever a firm, organisation, or person owns that has a dollar value.7. The amount of cash or accounts receivable a firm receives in payment from

others over a period of time.8. The amount of a firm's assets minus the amount of its liabilities,9. The profits the firm has plowed back into the firm.10. A debt that will be paid off within a year of the balance sheet date.11. The process of measuring, interpreting and recording data that reflect the

financial condition of a firm.

Ex. 5 Based on the meaning of the following synonyms, choose the most appropriate word for making sentences with the phrases below e.g: Builders provide to their clients an estimate of construction costs before actually beginning the work.

Estimate – implies a judgement, considered or casual, that precedes or takes place of actual measuring or counting or testing out;

Appraise – commonly implies the fixing by an expert of the monetary worth, but may be used of any critical judgement;

Evaluate – suggests an attempt to determine either a relative or intrinsic worth of smth in terms other than monetary;

Assess – implies a critical appraisal for the purpose of understanding or interpreting, or as a guide in taking action.

The ability of students for awarding rates. Real estate (at certain sum) for tax purposes. Damages (at certain sum) for preparing a lawsuit. The amount of income for completing tax returns. A person at their face value. The cost of work for negotiations with a client.

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The potential of an employee for a preliminary report to the management.

The outcome of a proposed business strategy for reporting to a stockholders’ meeting

The costs of an implementing a new production technique before a detailed analysis.

A diamond for setting a price. A company for investment purposes. A business proposal for drawing up a contract.

Assignment to text 1 :

1. Read the following abstract from the interview. Find answers to the following questions:

What activity is the company involved in? What profession is described? What functions do employees of the company perform? What is the difference between an accountant, a book-keeper and an

auditor?

Text 1 Interview of an Accountant

Hi, I'm Fiona and I'm an accountant. I have received professional training in the field of accounting. As an accountant I’m involved in the design and maintenance of a system of financial records and the interpretation of the data contained in them. I work in Edinburgh for one of the big accountancy firms. We design bookkeeping and accounting system. We also construct and interpret financial statements. It’s accountant who can tell what financial statements mean. Moreover, we look at the financial records or accounts of a lot of companies. We work with the accountants of those companies, and the people who work under them: the bookkeepers. Bookkeepers usually do not have as much training as accountants. They record the day-to-day transactions of the company in the proper account. Obviously, accounting is more sophisticated than bookkeeping.

Sometimes we act as auditors - specialist outside accountants who audit a company's accounts,- that is, we check them at the end of a particular period to see if they give a true and fair view (an accurate and complete picture). An audit can take several days, even for a fairly small company.

When a company's results are presented in a way that makes them look better than they really are, even if it follows the rules, it may be accused of creative accounting or window dressing. Of course, I never do this! I like my profession- accountancy.

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Assignment to text 2 :

1. Read the text and find answers to the following questions: What is the main function of accounting? What is considered to be basics of accounting? What can be considered as a toolkit for accounting?

2. Read the text once more and identify the sentences-definitions.3. Find the paragraph in which double-entry book-keeping is explained.

Reduce it in order to give a short and clear explanation.4. Translate the text.

Text 2 Accounting

One of the critical components of the operation of a business is a timely and accurate system of accounting that an entrepreneur or a company needs to consider. The entrepreneur needs to understand the accounting equation: assets= liabilities + owner’s equity. Within these three areas accounts are divided by: 1) assets, 2) liabilities, 3) owner’s equity or net worth, 4) revenue, and 5) expenses.

The accounting procedure utilized in a basic accounting system is the double entry bookkeeping cycle. Each transaction account has two sides, the debit or left side and the credit or right side. Increases in asset accounts are recorded as debits. Increases in liability and owner’s equity accounts are recorded as credits. Revenue increases are recorded as credits since they increase the equity. Increased expenses are recorded as debits because they decrease the equity.

The balance of an account is the difference between total debits and credits. Asset and expense accounts normally show debit balances; and liability, owner’s equity, and revenue accounts usually show a credit balance.

It’s necessary to determine the accounting period over which the financial activities of the business are measured. This can be a fiscal year beginning at any given time during a year and lasting for 12 months. It can also run the length of a calendar year.

Once these basics are understood and decided upon, the business owner will need to develop and utilize source documents to keep track of transactions. These source documents can include the following: daily summary of cash and sales activities, deposits and withdrawals from accounts, petty cash vouchers, payroll records, receipts, invoice vouchers and purchase vouchers. After these source documents have been organized, transactions will be recorded in books. Periodically information from the books is compiled into financial statements. These three basic financial statements are an income statement, a balance sheet and a statement of changes. The income statement compares revenues and expenses by identifying profit or losses. A balance sheet shows the status of assets, liabilities and equity accounts on a given day. A statement of changes in financial position

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indicates where money has come from and where it has gone from the beginning of an accounting period to the end.

Assignments to text 3:

1. Translate the headline of the text2. Read the text and say what the main types of financial statements are. 3. Look through the text and find all the sentences which clarify the differences in the financial statements.4. Look through the text and find explanations of the following:

balance of an account application of funds source of funds

5. Translate the text.

Text 3 Financial Statements

The complex organisation of a modern firm makes it important to keep systematic records of the claims of different classes of people against it. The accounting instrument employed for this purpose is called a balance sheet, or a statement of financial position. On the left side of the sheet are listed all the wealth and all the claims to wealth owned by the firm, together with the value of each. These are the firm's assets. Assets are usually classified and listed in order of their liquidity, that is, by the ease with which they can be converted into money. Cash and bank accounts, the most liquid assets, are listed at the top, with accounts receivable (bills due from customers and others), which are somewhat less liquid next, and land and buildings that take time and trouble to sell listed last.

On the right side of the balance sheet are listed all the claims against the firm's assets, 1iabi1ities and debts owed to people outside the firm. They are listed first and usually listed according to their permanence. Current liabilities, which are least permanent, include bills and accounts payable to individuals and to other firms, amounts owed to banks on short-term notes, payroll due to workers, and other debts due to coming in the immediate future. Outstanding bonds are a longer-term liability. The residual, or balance, left over after subtracting all liabilities from the total value of assets, is the ownership equity.

The statement is called a “balance sheet” because the total of the claims must exactly equal, or balance, the total of, the assets. There is, of course, nothing mysterious about this. It simply means that whatever part of the value of the assets is not owed to somebody else is automatically part of the owners’ equity. The balance sheet summarises the firm's financial position at a given moment of time and it necessarily changes from moment to moment to reflect the changes in that position as the firm does business.

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As the balance sheet summarizes the financial position of the firm on a given date, the income statement summarizes the firm's productive operations during a given period of time, usually a fiscal year. The income statement is a systematic summary of revenues and costs, organized to enable owners to see how the firm has operated. It gives figures for total sales or turnover (the amount of business done by the company during the year) and for costs and overheads. The first figure should be greater than the second: there should generally be a profit – an excess of income over expenditure. Part of the profit is paid to the government in taxation, part is usually distributed to shareholders as a dividend, and part is retained by the company to finance further growth, or repay debts, to allow for future losses, and so on. Although accountants differ in the exact arrangement of items and in the amount of detail given, the essence of the income statement is to show the year’s total receipts, total costs and profit. The statement also shows the allocation of profit between dividends and retained earnings, and the distribution of the dividends among the different classes of shareholders. In fact, the income statement can be reorganised to show the value added by the firm’s operations and the distribution of this value among the different participants in production.

A third financial statement has several names: the statement of changes in the USA, the source and application of funds statement, the source and uses of funds statement, the funds flow statement, the cash flow statement, the movement of funds statements. As all these alternative names suggest, this statement shows the flow of cash in and out of the business between balance sheet dates. Sources of funds include trading profits, depreciation provisions, borrowing, the sale of assets, and the issuing of shares. Applications of funds include the purchase of fixed financial assets, the payment of dividends and the repayment of loans, and, in a bad year, trading losses.

If a company has a majority interest in other companies, the balance sheets and profit and loss accounts of the parent company and the subsidiaries are normally combined in consolidated accounts.

Assignment to text 4:

1. Look through the text concentrating on the word “audit” and its derivatives.

2. Write down the main issues of the text3. Read the text once more, check and correct your list of issues if

necessary.4. Divide the text into paragraphs to make it easier for comprehension. Try

to restructure the text accordingly.5. Read and translate the following words and word combinations:

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accuracy, annual general meeting, board of directors, checking, deficiencies, determine, deviations, directives, external, implemented, ratified, shareholders (GB) or stockholders (US), standard operating procedures, subsidiaries, a synonym, transnational corporations (TNC)

Match them with their equivalents underlined in the text. Write down synonymous expressions in your notebook.

Text 4 Auditing

The traditional definition of auditing is a review and an evaluation of financial records by a second set of accountants. An internal audit is a control by a company’s own accountants, checking for completeness, exactness and reliability. Among other things, internal auditors are looking for departures from a firm’s established methods for recording business transactions. In most countries, the law requires all firms to have their accounts audited by an outside company. An independent audit is thus a review of financial statements and accounting records by an accountant not belonging to the firm. The auditors have to judge whether the accounts give what in Britain is known as a “true and fair view” and in the US as a “fair presentation” of the company’s (corporation’s) financial position. Auditors are appointed by a company’s most senior executives and advisors, whose choice has to be approved by the owners of the company’s equity at the company’s yearly assembly. Auditors write an official audit report. They may also address a “management letter” to the directors, outlining inadequacies and recommending improved operating procedures. This leads to the more recent use of the word “audit’ as an equivalent term for “control”: multinational companies, for example, might undertake inventory, marketing and technical audits. Auditing in this sense means verifying that general management instructions are being executed in branches, companies which they control, etc.

Discussion

These are some useful word-combinations in addition to the glossary that you should translate, memorize, and use while discussing the questions:

majority interest, internal audit/auditor, audit report, timely and accurate system, accounting equation, double-entry bookkeeping, accounting period, financial activities, source documents, daily summary, accounting instrument, current liabilities, longer-term liabilities, longer-term liability;

to keep records, to convert smth. into money, to list according to permanence, to subtract liabilities, to summarize financial position, to pay bills, to issue new shares, to distribute dividends, to measure activities, to develop source documents,

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to utilize source documents, to keep track of transactions, to reflect the changes, to finance growth, to repay debts, to allow for future losses, to verify execution.

1. Have you had courses in accounting or bookkeeping? Do you enjoy this type of work?

2. Did you ever have to keep detailed records of anything? Did you enjoy doing so?

3. To what end users does the information compiled by accounting system flow?

4. What are functions of the financial statements of a firm?5. If you were an investor, what are some ways in which you would use the

financial statements of a firm before investing in it?6. What are the two categories of auditors? 7. What is the main function of auditing?

For your notes:

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UNIT VII COMPANY STRUCTURE. GOVERNANCE

Glossaryto devolve (powers) передать (полномочия)

chart схема, таблица, график

subsidiary дочерняя компания, филиал

crucial решающий, ключевой, критический

to cast a vote отдавать голос (на выборах),

опускать избирательный бюллетень

to wind up ликвидировать, завершать

to dispose (of) избавляться, передавать, продавать

remuneration вознаграждение, оплата

motion предложение (на собрании)

proxy полномочие, доверенность,

передача голоса или полномочия

poll голосование, число голосов,

регистрация избирателей

E x. 1 Translate the following pairs of words. Explain the meaning of prefix-dis.

Advantage - disadvantage; approval - disapproval; comfort - discomfort; ability - disability; order - disorder; closure – disclosure.

Ex. 2 Translate and use the following word-combinations in sentences .of your own:

lack of time - to lack time;

lack of money - to lack money;

lack of words - to lack words;

lack of opportunity - to lack opportunity;

lack of finance - to lack finance

lack of skills – to lack skills

lack of specialists - to lack specialists.

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Ex. 3 Pronounce correctly and translate the words that are often

confused.

Value - volume; properly - property; track - truck; cast - cost; effort - afford; adopt - adapt, work - walk, sell - sail - sale, pure- poor, law - low, pool- poll.

Ex. 4 Replace the italicized with appropriate synonyms:

1. The shareholders’ meeting is scheduled for the first Tuesday in March.

2. The CEO will report on the company’s day-to-day work.3. He will comment on various data illustrating the firm’s activity

in the period under review.4. He will disclose the latest assessment of all that the corporation

owns.5. The Chief Financial Officer will speak about the company’s

progress using the language of figures.6. He will give his judgement as to the prospects of future growth.7. The Legal Director will summarize measures taken to ensure

that all records comply with the new legislation.8. Specifically, he will explain the reason for the new, and more

detailed and complicated organization of the overseas branches.9. One of the items on the agenda concerns measures stimulating

the staff to work better.10.The shareholders will vote on issues involving strategic

planning and profit distribution.

Assignment to text 1:

1. Read and translate the title of the text.2. What information is likely to be found in this text?3. Read the text. What is the subject?4. Was your guess shrewd?5. After the second reading of the text give a suitable Russian equivalent for the following: a corporate person day-to-day administration articles of association

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to retain the ultimate say6. Look through the last paragraph. What is the author’s thesis on the relationship between the general meeting and the board?7. Translate the text.

Text 1 Company Organization

By incorporation, there is formed a corporate person which is separate from the servants who work for it or the shareholders who are members of it, whether it be a small family company, the shareholders of which actively participate in decision making and day-to-day administration, or a large industrial concern, wherein ownership (by the shareholders) and management (by the board of directors) may be largely divorced from each other. The organic structure of this corporate person and the constitutional relationship between the company’s different organs are determined by the decisions of the members recorded in the articles of association and resolutions of meetings. In this fashion they determine how decisions are to be effected and how acts of the organs take effect as acts of the company itself.

The primary organ is the general meeting of the shareholders. It provides the forum in which all members are entitled to participate and vote. It will devolve powers of management to another organ, the board of directors, but retaining the ultimate say in general policy and decision-making, albeit decision-making in general meeting may be manipulated by the board.

The relationship between the general meeting and the board is not entirely clear. In theory, the ultimate decision-making power lies in the general meeting. It can override the wishes of the directors and take away from them the powers devolved to them. In practice, it tends to follow the lead suggested by the directors.

Text 2 ` The Board of Directors

The board of directors of a limited company is primarily responsible for determining the objectives and policies of a business. It’s the directors who determine the direction the business is going to take. They will need to ensure that the necessary funds are available and will appoint key staff to whom they will delegate the authority to run the business on a day-to-day basis. They will need to design an effective organization structure so that there is both a chain of command linking one level of management with another and an effective communication network so that instructions can be passed downwards and information passed upwards.

The directors are appointed by the shareholders, normally at the company’s annual general meeting, at which the chairman of the board will be expected to account for their stewardship during the previous year. The company’s accounts

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will be presented to the shareholders at that time so they can judge for themselves whether or not the board has been successful.

Direction in business is like strategy in a war situation. The strategic decisions determine the areas in which the company’s resources will be employed. Above all it involves planning to ensure that the business first survives and then flourishes. Strategic decisions, made by the board of directors, are concerned with the disposition of resources. This contrast with the tactical decisions by means of which the senior executives (appointed by the directors) carry out in detail the plans conceived or approved by the board of directors. The fact that boards of directors tend to meet rather infrequently, say once a week, means that part-time directors can be elected to the board. Since they will not have departmental responsibilities within the company, they are often described as non-executive directors. Non-executive directors are not managers of the company; they are outsiders, often directors of other companies. There are arguments in favour of such directors: though they may lack a detailed knowledge of the company’s activities, they may bring expertise to the board. Some are lawyers, or experts in tax affairs, some have particular knowledge of the industry or of particular areas. Some represent influential groups of shareholders whose support is necessary if the board is going to carry out its plan, while others are directors in a number of companies and are used to interlock boards within a group of companies. For example, a holding (or patent) company may appoint a director from their board to serve on the board of a subsidiary company, with a view to keeping a watching brief on the directors’ activities.

Assignments to text 3:

1. Read the headline. Make suggestions as for kinds of meetings described.2. Write down the questions the answers to which you’d like to find in this

text.3. Read the text and find the most essential statements. Do they contain the

answers to your questions?4. Translate the text.5. Explain the following and suggest Russian equivalents:

show of hands class meeting

Text 3 ` Meetings

Fundamental decisions concerning the company’s activities and future are decided in general meetings of the shareholders. Usually they are confined to the single annual general meeting (A.G.M.) which must be held in each calendar year for declaring dividends, considering accounts and the reports of auditors and

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directors, and for electing directors and auditors. Extraordinary general meetings may be called when the need arises. Meetings of a particular class of members or creditors are called class meetings.

The power of decision as to the following generally rests in the general meeting: winding-up; changes in the memorandum and articles; payment of dividends; changes in capital structure; disposal of a substantial part of the undertaking; and the appointment, remuneration and control of directors. In addition, the general meeting can generally act where the board is unwilling or unable (e.g. because of deadlock) to exercise its powers.

The meeting has as chairman, a person elected by the members, generally the managing director or another director. A member may move any resolution on the subject matter indicated in the notice. Members may speak to the motion, after which a vote is taken. A show of hands (on which proxies cannot vote), with one vote per person voting, may decide the issue. But a poll can be demanded by a specified number of shareholders or by the chairman, exercising his power to give effect to the true sense of the meeting. On a poll, each share generally carries one vote, but a member is not obliged to cast all his votes or to cast all those he does use the same way; hence, a nominee shareholder can give effect to the wishes of different beneficial owners.

Assignments to the text 4:

1. Read the text and find answers to the following questions:

What is the most common view to levels of management? Are there any differences in responsibilities of the managers?

2. After second reading write down all the words and word combinations describing activities and responsibilities of managers.

3. Translate the text. 4. Think if responsibilities and functions of managers differ from those of

entrepreneurs.5. Assess your potential for being a manager.

Text 4 Levels of Management

Managers can be differentiated according to their level in the organization. Although large organizations typically have a number of levels of management, the most common view considers three basic levels: top, middle and first-line managers.

Top managers. Top managers make up relatively small group of executives who control the organization. Titles found in this group include president, vice president, and chief executive officer (CEO).

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Top managers establish the organization’s goals, overall strategy, and operating policies. They also officially represent the organization to the external environment by meeting with government officials, executives of other organization, and so forth. The job of a top manager is likely to be complex and varied. Top managers make decisions about such activities as acquiring other companies, investing in research and development (R&D), entering or abandoning various markets, and building new points and office facilities. They often work long hours and spend much of their time in meetings and on the telephone.

Middle managers. Middle management is probably the largest group of managers in most organizations. Common middle-management titles include plant manager, operations manager, and division head. Thus, the general manager of a Ford assembly plant in Detroit is a middle manager.

Middle managers are primarily responsible for implementing the policies and plans developed by top management and for supervising and coordinating the activities of lower-level managers. Plant managers, for example, handle inventory management, quality control, equipment failures, and minor union problems. They also coordinate the work of supervisors within the plant. In recent years, many organizations have thinned the ranks of middle managers since 1982, and Du Pont has made cuts of 15 percent. Still, middle managers are necessary to bridge the upper and lower levels of organization and to implement the strategies developed at the top. They can also be a significant source of information and productivity when given the autonomy to make decisions affecting their operating units.

First-line managers. First-line managers supervise and coordinate the activities of operating employees. Common titles for first-line managers are foreman, supervisor, and office manager. These are often the first positions held by employees who enter management from the ranks of operating personnel. In contrast to top and middle managers, first line managers typically spend a large proportion of their time supervising the work of subordinates.

Assignments to text 5:

1. Read the headline. What areas of management do you know?2. Read the text and say what functional areas of management are

described.3. Are these areas typical for all kinds of companies?4. What is the most important area of management to your mind?

Does your answer depend on a company’s profile?

Text 5 Areas of ManagementManagers at different levels may work in various areas within an

organization. At any given firm, there may be marketing, financial, operations, human resource, administrative, and other kinds of managers at all three levels.

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Marketing manager. Marketing managers are those whose primary duties are related to the marketing function – getting whatever the organization produces (be it Ford automobiles, Newsweek magazines, or Associated Press news reports) into the hands of consumers and clients. Key areas of concern are product development, promotion, and distribution. Given the importance of marketing for virtually all organizations, the development of managers in this area can be critical. John Akers, CEO of IBM, spent much of his career as a marketing manager.

Operations managers. Operations managers are primarily concerned with establishing the systems that create an organization’s products and services. Typical responsibilities include production control, inventory control, quality control, plant layout, and site selection. James Olson, CEO of AT&T spent much of his career as an operations manager.

Human Resource Managers. Human resource managers are concerned with hiring, maintaining, and discharging employees. They are typically involved in human resource planning, employee recruitment and selection, training and development, designing compensation and benefit systems, formulating performance appraisal systems, and discharging low-performing and problem employees. Until the last several years, human resource managers were not considered to be particularly important in many organizations. Top managers now recognize their value, however, in part because of increased awareness of contributions of human resources and in part because of the complex legal environment of human resource management. Consequently, although no large companies have CEOs from the ranks of human resource executives, these activities are now making great strides up the organizational ladder.

Assignments to text 6:

1. Read the text and scan for different kinds of managers described in the text. Write them down into your notebook.

2. After the second reading concentrate on the sentences characterizing activities of the managers mentioned. Add to the list that you’ve done for Text 3.

3. Explain what “specialized manager” means?4. Read and translate the last paragraphs of the text. Do you share this

opinion? Give your reasons.

Text 6 Kinds of Managers

Administrative, or general, managers are not associated with any particular management speciality. Probably the best example of an administrative management position is that of a hospital or clinic administrator. Administrative

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managers tend to be generalists; they have some basic familiarity with all functional areas of management rather than specialized training in any one area.

Many organizations have specialized management positions in addition to those already described. Public relations managers, for example, deal with the public and media for firms such as Philip Morris and Dow Chemical to protect and enhance the image of the organization. Research and development (R&D) managers coordinate the activities of scientists and engineers working on scientific projects in organizations such as Monsanto, NASA, and Merck. Internal consultants are used in organizations such as the Prudential Insurance Company to provide specialized expert advice to operating managers. Many areas of international management are coordinated by specialized managers in organizations like Eli Lilly and Rockwell International.

The number, nature, and importance of these specialized managers vary tremendously from one organization to another. As contemporary organizations continue to grow in complexity and size, the number and importance of such managers are also likely to increase.

Assignments to text 7:

1. Read the text and make an outline of it.

2. After the second reading explain the following: formal organization vs. informal organization line authority vs. staff authority

3. Write down the names of departments of a typical company.

4. Translate the text.

Text 7 Company Structure

Company structure can be easily represented graphically in a chart. It is commonly known as an organization chart. The organization chart shows the chain of command which is the line along which authority flows from the president to the employees at the bottom of the organization chart.

It indicates the title of each managerial position and, by means of connecting lines, shows who is accountable to whom and who is in charge of each department.

The organizational chart is a graphic representation of the formal organization being not capable to reflect the informal organization. The informal organization is the informal contacts, communications, and ways of doing things that employees develop. People communicate, and all organizations are networks of communication. Communication is the process of influencing the behavior of others by sharing ideas, information, or feeling with them. Written memos, reports, procedures, and oral communication flow through the firm. Informal

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communication is communication that does not follow the formal organization chart. It is especially important whenever a firm needs to make a fast decision.

There are two basic types of authority in organization: line authority and staff authority. Line authority is the authority to issue orders to subordinates down the chain of command. Managers in charge of such crucial activities as sales and production have line authority.

When a business grows in size and becomes more complex there is need for specialists. In such a case administrators may organize staff departments and add staff specialists to do specific work. These people are usually busy with services, they are not tied in with a company product. The activities of the staff departments include accounting, personnel, credit and advertising. Managers with only staff authority generally cannot issue such orders. Staff authority is the authority only to assist and advise line managers. There are several exceptions to the rule that only line managers can issue orders.

Assignments to text 8:

1. Read the text which is in fact presentation of a typical foreign company.

2. Write down all the words and word combinations which would help to describe the structure of any company.

Text 8

If you look at the picture you will see the organizational structure of a company «Rossomon», which might appear typical for most western companies.

We see that the Managing Director is responsible for running the company and is accountable to the Board. He is assisted by four executive departments. These are Human Resources which is responsible for personnel, training and management development; then there is the Finance Department which takes care of corporate finance and accounting; next we have the Management Services Department the head of which is in charge of rationalization throughout the company; and finally there is the R & D Department – research and development – which works closely with the five regions on new product development.

So this brings us on to the regions. Directly under the Managing Director, there are five Regional Managers. Each of them is responsible for the day-to-day management of a territory – these are geographically split into North, South, East, West and Central Regions.

Now then, the five regions are supported by two sections – Marketing and Technical Services. They are organized on a matrix basis with section leaders accountable to the Regional Managers. They work closely with the regions on the marketing and technical side.

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Now in addition to the parent company, the Rossomon has three subsidiaries, namely Rossomon France, Germany and Japan. The subsidiaries report to the Export Sales Department, which in turn is accountable to the Board. This is a brief overview of a typical company structure.

Assignment to text 9:1. Read the text and choose the best headline out of the following:

Concentration of control Mechanism of control Management control

Give reasons for your choice, suggest your own headline.2. Read the text once more and find information on the issues suggested as

headlines.3. Find answers to the following questions:

How are company decisions taken? How do minority shareholders participate in making decisions? What is a management-controlled corporation?

4. Translate the part explaining the use of proxies.

Text 9

Absolute control over a corporation is guaranteed by ownership of one more than half the voting shares. If the capital of the company is

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$10 million, represented by 100,000 shares of common stock, absolute control requires ownership of 50,001 shares, an investment of $5,000,100. If, however, half the firm's capital is provided by bonds and preferred stock, neither of which is entitled to vote, absolute control can be exercised by ownership of only 25,001 shares of common stock, requiring an investment of only $2,500,100.

The shareholder, depending on the size of his shareholding, is generally able to participate to some extent in company decisions by voting at meetings but he must bow to the will of the majority if that goes against him. His rights depend in part on articles of association which may be altered.

At root, company decisions are taken by the members, meeting together and deciding by a majority vote, however large that majority may have to be for a particular issue. The members may and generally do, devolve the power of decision to the board of directors, in which case they may positively have to take it back again before they can exercise it themselves. Again, however, it is the members deciding by majority weather their power is to be devolved or reclaimed. Generally speaking, this practice makes sense.

In fact corporate control is often exercised by people without a majority control. When ownership of common stock is widely dispersed over thousands of people, each holding only a few shares, their participation in running the company is limited to sending in proxy votes to be cast on their behalf by representatives of the controlling management group. In such a case, a concentration minority block of shares can exercise control.

As a matter of fact, the common stock of many modern corporations, including some of the very largest ones, is so widely dispersed that no individual stockholder or group holds more than a small fraction of the total number of shares. This leaves effective control in the hands of the management itself, for no individual stockholder has either enough votes to affect the outcome of a stockholders’ meeting or enough information about the operations of the firm to make an intelligent decision. Since the existing board of directors prepares the agenda for the stockholders’ meetings, it has exclusive power to decide what policy issues are to be voted on. It also nominates the slate of new directors to be elected to the board and hence is a self-selected, self-perpetuating body.

Of course, the stockholders must vote on the policy matters and must elect the new directors, but this is accomplished by the use of proxies. The management has the power to mail material (at company expense) to each stockholder, explaining its position on the matters to be voted on and urging the election of its nominated slate of officers. The stockholder's participation is limited to filling out and mailing back the proxy to be voted by the management on his "behalf". In a very real sense, management control represents the ultimate in "leverage", for it permits control of a vast empire of capital and the economic, social, and political power that goes with it, by a group with practically no investment at all. The stockholders of a management-controlled corporation are relegated to a position as outsiders, more like creditors of the firm than like owners in the old-fashioned sense of the word.

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Discussion

These are some useful word combinations in addition to the glossary that you should translate, memorize, and use while discussing the questions:

to make a sound judgment, to follow procedure, to exercise control, to cast votes on one’s behalf, to effect the outcome, to make an intelligent decision, to elect directors, to mail material, to record in articles of association, to take effect, to provide a forum, to be entitled, to devolve powers to, to retain an ultimate say, to override wishes, to follow the lead, to give effect, to issue orders, to enter/abandon markets, to thin the ranks, to bridge levels of organization, to supervise the work, to hire/maintain/discharge employees, to design compensation and benefits system, to formulate performance appraisal systems, to have basic familiarity with smth, to provide specialized expert advice.

Overall strategy, operating policy, external environment, inventory management, significant source, primary duties, a show of hands, low-performing worker.

1. Explain the mechanism of control concentration in a big company.2. Compare positions of the stockholders and the board of directors? What

are their relations if there are any?3. Speak about the board of directors and its functions. What traits of

character must directors possess to manage a corporation? Use the word-lists from your notebooks.

4. How are major decisions taken in a corporation?5. Speak on how the majority rule works.6. What is the relationship between the general meeting and the board?7. A corporation’s board of directors is supposed to represent the interests of

the shareholders. The chief executive officer (CEO) is often a member of the board, perhaps its chairperson. Futhermore, members of the CEO`s top management team are often inside directors. Is there a conflict of interest here? Explain.

8. Draw a chart of texts 4, 5 and 6 to make management system clear.9. Draw the structure of some successful company. Describe it taking

advantage of text 8 as a sample. Use the following word-combinations:to run a company, to be accountable to smb., to be responsible for, to

take care of, to work closely with, to be in charge of, to assist/ to be assisted, to support/to be supported, to work closely with.

10. Do you agree with the following statement? Suggest how to avoid disorder and malperfomance in a company.

“The only things that evolve by themselves in an organization are disorder, friction and malperformance”. Peter Drucker

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UNIT VIII THE IMPORTANCE OF THE CORPORATION

Glossaryminority меньшинство, меньшая часть

mining горная промышленность, горное дело

to can консервировать

output выпуск, продукция, общий объем производства

to elaborate детально разрабатывать, вырабатывать,

развивать, дополнять

performance зд. : характеристика работы, работа

purchasing закупка

in terms of (numbers) языком (цифр), с точки зрения (цифр)

Ex. 1 Translate the following sentences. Explain the difference in using the word “can”.1. The engineering efficiency of the plant can be high with innovative staff.2. Much could be said about shortage of people with the combination of ability,

imagination, energy, discipline required for effective enterprise.3. To can a poor quality of fruit, or to pack it in cans of the wrong size, or to can

too much or too little can destroy the market.4. Somebody must keep in constant touch with the many markets for canned

fruit.5. Another special advantage of size is that a large firm can employ nationwide

advertising in radio, television, and other media.

Ex. 2 Read and translate the following sentences paying attention to use of the verb “to keep".

1. The complex organization of a modern firm makes it important to keep systematic record of the claims of different classes of people against it.

2. Somebody must keep track of crops in different areas and know when and where it will go.

3. Division of labor necessary for most effective use of management ability requires a workload large enough to keep manager employed in their fields.

4. Full-time staffs of any efficient company can be easily kept busy in a large productive operation.

5. Somebody must keep in touch with prospective clients.

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6. Differences in the type of business organisation are in keeping with the requirements of efficient production.

Ex. 3 Consult a dictionary, translate the sentences paying attention to the underlined word.

1. The law now enables holders of securities to act intelligently on the matters involved.

2. The stockholders must vote on the policy matters.3. Engineering efficiency and production line economy are not all that

matter s . 4. All matter may be classified as either solid, liquid or gas.5. The principle of classification is the thing that matters.6. Organized stock exchanges permit the transfer of the stocks of many

corporations in a matter of hours.

Ex.4 Translate the following sentences using the model. Model: It takes an _hour to get to my house.Чтобы добраться до дома, мне требуется час.

1) It may take months to find the right man.2) It takes more enterprising talent and organising skill to start a

successful business than it does to keep one going after it has been set up.

3) It takes a large firm to give full employment to the talents of such people.

Make up your own sentences using the model.

Assignments to text 1 :

1. Read the text. Scan for figures in the text. Say why the text is rich in figures.

2. Read the text and write down the topic of each paragraph.3. Read the text and identify the sentences and words which signal contrast or comparison.

4. What are the things that are compared or contrasted? Give a headline to every paragraph. Don’t you think that the text needs editing? Try to rearrange the sentences.

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Text 1 The Number of Corporations

In terms of numbers, corporations represent a small minority of U.S. business firms. In fact, 80 percent of the 11 million business firms now active in the U.S. are sole proprietorships, and another 8 percent are partnerships. Proprietorships are especially numerous in the farming, retailing, and service industries, where there are many family-sized firms. Even in mining and manufacturing, however, there are more sole proprietorships and partnerships than corporations.

The Size of Corporations

However, when we look at size and economic importance rather than numbers, we find that the 12 percent of all firms that are corporations receive nearly 80 percent of total sales revenue. Even in retail trade, where many small stores are operated by their proprietors, corporations do 50 percent more business than partnerships and proprietorships combined.

The biggest contrast between numbers and sales appears in transportation and public utilities. While 84 percent of the firms in this industry are sole proprietorships and partnerships, these are mostly owner-operated taxis and trucks. Corporate truck and bus lines, railroads, airlines, and telephone, gas, and power utilities sell more than 90 percent of the total output. Only in agriculture is the total volume of corporate sales relatively small. Even so, while only 1 percent of agricultural firms are incorporated, these corporations account for 14 percent of the value of agricultural product sold.

Differences in the type of business organization that predominate in different industries are in keeping with the requirements of efficient production. Sole proprietorships predominate where technology permits economic operation with no more capital than a single enterpriser can command; corporate organization is found where the scale of production requires the combined capital of many people.

Assignments to text 2 :

1. Read the text and explain why it is necessary to distinguish between the size of a firm and the size of a plant. Identify the key sentences which help to understand it.

2. Read the text once more and answer if giant corporations are economical.3. Translate the paragraph which provides an example. What statement does

it support?4. Read the first sentence of the last paragraph and formulate the point

which “is increased”.5. Write down a concluding paragraph of 2-3 sentences which would make

the text completed.

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Text 2 Size of Firm vs Size of PlantIn evaluating giant firms, it is necessary to distinguish carefully between the

size of the firm and the size of the individual physical factories, plants, or establishments that the firm owns and operates. Efficient production requires individual plants large enough to use expensive specialized equipment and to employ specialized workers. This means that firms must be large enough to own and operate these large plants. Once the firm is operating the most economical plant, however, there is no increase in engineering efficiency when the firm grows large enough to own and operate several plants, all equally efficient.

For example, fruit can be canned in a plant costing less than $100,000 (or, for that matter, in an ordinary household kitchen). With hand labor and simple equipment, however, the cost per can is very high. A larger cannery, operating on a production-line basis with automatic cooking, canning, and conveying equipment may require an investment of $ 1 million, but the production cost per can is a fraction of what it is in the smaller plant. If the output can be sold, a $ 1 million corporation with one big plant is more economical than ten $ 100,000 corporations, each operating a small, inefficient plant. But a $ 10 million corporation, operating ten efficient plants, achieves no greater production economy than ten $ 1 million corporations operating only one plant each.

The force of this point is increased when we realize that giant corporations not only operate many plants but also usually operate plants in many different industries. Thus, an automobile company not only has many plants producing automobiles, it also has plants producing trucks, locomotives, refrigerators, air-conditioning equipment, radios, television sets, and electrical generating equipment. The world's largest "steel" company is also, among other things, one of the world's largest cement producers. A large “food processing” firm also makes electric iron and other household appliances.

Assignments to text 3 :

1. Read the text and find the sentences explaining the notion and function of specialized management.

2. Translate the text and indicate advantages/disadvantages that specialized management provides for any enterprise.

3. Read the text once more and try to understand if the author stands for or against large firms.

4. Identify and read out the sentences for or against large firms.5. Do you agree that “people with combination of ability, imagination,

energy, discipline, and drive required for effective enterprise are probably our scarcest economic resource”. Give your reasons focusing on Russian realities.

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Text 3 Specialized Management

If engineering efficiency and production-line economy were all that mattered, much could be said for a public policy designed to put severe limits to corporate size. But there is more to productivity than engineering. To return to the example of the fruit cannery, the assembly of raw materials requires specialized knowledge of different kinds of fruit and their canning properties, moreover, somebody must keep track of crops in different areas and know when and where to buy, and in what amounts. Somebody must keep in constant touch with many markets for canned fruit to decide how much output will be needed and where it will go. If these decisions are not properly made, the engineering efficiency of the plant can’t be more than offset by marketing losses. To can a poor quality of fruit, or a kind that few people really want, or to pack it in cans of the wrong size or of poor design, is just as wasteful of resources as operating a plant that is too small to be efficient. Careful attention to such details is the function of specialised management; but the elaborate division of labor necessary for most effective use of management ability requires a workload large enough to keep manager employed at their specialities.

A company large enough to operate only one plant of the most economical size is often too small to specialize its management effectively. Full-time staffs devoted exclusively to production, marketing, purchasing, personnel, finance, and accounting can be kept busy only as adjuncts to a large productive operation that is spread over many plants.

Even more important is the great advantage of providing as wide a field as possible for the skill, imagination, and initiative of enterprisers. Steady rise in productivity and improvement of quality are the results of conscious human effort. Somebody must perceive the advantages of each specific change in a method of production, decide to adopt it, and be able to put the decision into effect. People with combination of ability, imagination, energy, discipline, and drive required for effective enterprise are probably our scarcest economic resource. It takes a large firm to give full employment to the talents of such people.

Assignments to text 4 :

1. Read the text and enumerate all reasons for large firms.2. Write down these reasons into your notebook.3. Look through the previous three texts and identify the facts for or against

large firms. Write down the sentences into your notebook.4. Write a concluding paragraph with your judgement on the importance of a

corporation taking advantage of the sentences that you’ve written down.

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Text 4 Other Reasons For Large Firms

Beyond productive efficiency and enterprise, however, there are other reasons why firms grow large. The larger a firm becomes, the easier it is to grow still larger by trading on its reputation. Reputation is especially important when prospective buyers are unable to experiment. For example, a firm offering standardised nation-wide service seldom does a better job in any given place than the best local firms, but many travellers prefer to patronize filling stations, stores, motels, or restaurants with familiar names and reliable reputations, rather than risk disappointment by an unknown firm.

It is easier for an established firm with a good reputation to bring out a new product than it is for a new and unknown firm, even when the new product is completely unrelated to the old ones. Some large firms grow merely because it is easier for customers to get service for products that are widely used and familiar to mechanics and maintenance men. Another special advantage of size is that a large firm can employ nationwide advertising in radio, television and other media at costs that would be impossible for a firm with a small local market.

A large successful firm is also in an advantageous position when raising capital for still further expansion. An established firm enjoys the advantage that many people prefer to buy new securities in a company whose reputation and performance are well known, rather than to invest in a new and untried venture. Also, borrowing money is facilitated when bankers and other lenders already know the company.

Assignments to text 5 :

1. Look through the text and say what alternative means of organizing a business are discussed.

2. Read the text and find the topic sentences for each paragraph.3. Scan for sentences which would help to give definitions to alternative means

of organizing a business.4. Give definitions of all types of businesses.5. What are the main advantages of the types of business discussed in the text? 6. Explain the following:

synergy reduction in the interactive “size” of the world economy customized relationship stakeholder vs. shareholder identity theft typical alignment

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Text 5 Alternative Means of Organizing a Business

In organizing an emerging business the typical alignment is either to have a sole proprietorship, a partnership (limited or general), or possibly a corporation. Recently though, with the reduction in the interactive “size” of the world economy and the increasing speed of transactions it is apparent that there may be adaptations of the three basic organizational structures that would fit entrepreneurs better. Two organizational formats that are talked about slightly in text books are the joint venture and the consortium/cooperative.

In a recent article in Business Week magazine, Dallas based Dresser Industries joined together as joint venture partners with Komatsu Ltd. of Japan to build construction equipment and engineering facilities in the United States, Latin America, and Canada. This joint venture was to merge their manufacturing, engineering, and finance operations to reduce cost, yet retain distinct product lines that would be sold through their existing dealership networks.

The joint venture allows for a customized relationship for a specified duration with each principal member having explicit rights and responsibilities. It also includes the means to dissolve the joint venture. The power of the joint venture lies in the synergy which two or more companies bring to bear on specific detailed activities which both are involved. For instance, in Normal, Illinois, the Diamond Star motors Corporation is a joint venture between Mitsubishi of Japan and Chrysler Corporation of America. They cooperatively planned, designed, and laid out an automobile plant in this Midwest community that can produce up to 250 000 cars a year, while hiring fewer than 3,000 employees. The technology, engineering, and management style have lead to the production of remarkably high quality of automobiles that have received many automobile awards. Unfortunately, due to Chrysler’s poor financial health, Chrysler is seeking Mitsubishi’s purchase of more of the joint venture’s financial responsibilities to create some cash flow for Chrysler Corporation. Although this may appear to be negative news, it’s one of the strengths or the joint venture style of organization. It provides flexibility for partners to move in and out to varying degrees.

The other organization format is the cooperative or consortium based organizational pattern. In this form of organization, several companies come together to work on projects of common interest and to support these projects with their expertise and their power base. An excellent example of this is the Airbus consortium of government agencies in Europe which includes France, Germany, Britain, and Spain. Once thought of as a little plane manufacturing and marketing concern that holds 30 percent market share in the airline industry. This is still far behind the 53 percent held by Boeing, but orders are soaring and it has made tremendous strides in acquiring major contracts by worldwide airline companies. It is currently seeking major orders from United, American, or Delta Airlines.

Although they have been receiving significant notoriety of their successes, the politics of operating and managing consortium based activities is troublesome. Each firm has a variety of stakeholders with varying objectives that need to be

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accomplished. This hinders the path of least resistance in the market place; and hence, many times the politics or interrelationships of consortiums or cooperatives may cause its collapse.

In this era of pace change, consortiums/ cooperatives and joint ventures are means of taking advantage of new market niches that are developing or to redefine and reinvent products to better serve current customers.

Discussion:

These are some helpful word-combinations in addition to the glossary that you should translate, memorize, and use while discussing the questions:

to operate a plant, to do business, to be in keeping with requirements, to resolve problems, to take advantage of (smth.), to exceed a size, to evaluate firms, to use equipment, to employ specialized workers, to achieve production economy, to put limits, to keep track of (smth.), to keep in (constant) touch, to waste resources, to specialize management, to put (the decision) into effect, to bring out a new product, to get service, to employ advertising, to raise capital, to enjoy advantage.

1. Prove economic importance of big corporations.2. Do you agree with the author's reasons for large firms?3. Explain the notion of specialized management providing illustrative

examples.4. What is your final judgement about the importance of the corporation?

Aren’t small-scale businesses equally important? 5. Do you agree with the following statements?

“Today the large organization is lord and master, and most of its employees have been desensitized much as were the medieval peasants who never knew they were serfs. Ralph Nader“If small business goes, big business doesn’t have any future except to become

the economic arm of a totalitarian state.” P.D.Reed“America can no more survive and grow without big business that it can

survive without small business. Every fact of our economic and industrial life proves that the two are independent. You cannot strengthen one by weakening the other, and you cannot add to the stature of a dwarf by cutting off the leg of a giant… The American industrial machine is a unit, just like an automobile. It’s made of big parts and little parts, and each of which does its particular job and all of which are intricately fitted together. You may think that it would be fun to sort them all into neat piles according to size to please the statisticians. You could even pass a law declaring that all the parts must be the same size, and the theorists, no doubt, would be delighted. But when you get through your automobile won’t run and neither will American industry”. Benjamin Fairless

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UNIT IX REVIEW

Ex. 1: Vocabulary fills-in. In the following sentences supply the correct verb or noun from the box below.

Differ continue equip bankrupt difference continuity equipment bankruptcy own decide satisfy owner ownership decision satisfaction

1. The sole proprietor can _____ for himself if he wants to set up a new business.

2. The _____ can keep all of the profits of the business.3. The proprietor made a _____ to purchase some new _______.4. The sole proprietorship, partnership, and corporation ______ in the

manner in which they raise capital.5. If the owner makes the wrong decision, it may _____ the business.6. The proprietor doesn’t wish to _____ his enterprise, because he has been

unsuccessful and he doesn’t get any ______ from his efforts.7. It takes capital to purchase inventory and ______ the workship with the

necessary tools.8. We try to_____ the customers so that they will _____ to shop here.

Ex. 2 Building your business vocabulary is very important. The new business terms are printed below, along with definitions. Please match each with its proper definition.

a) sole proprietorship b) unlimited liability c)partnership d) partnership agreement e) corporation f) shareholders (or stockholders) g) corporate charter.

1) A contract between the incorporators and the state that authorizes the formation of the corporation.

2) An association of two or more persons to carry on as co-owners of a business for profit.

3) An oral or written contract between the owners of a partnership that identifies the business and states the partners' respective rights and duties.

4) A legally chartered organization that is a separate and legal entity apart from its owners.

5) A business owned by one person.6) The owners of a corporation.7) The concept that the business owner is responsible for

claims against the firm that goes beyond the value of the

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owner's ownership in the firm.

Ex. 3 Building your business vocabulary is very important. The business terms are given below, along with definitions. Please, match each with its proper definition.

accounting bond entrepreneurloss policy profit venture creditor capital bankrupt production service stock

1. Any of the equal parts that the ownership of a corporation is divided into.2. Money or property and equipment used for production.3. A person who starts, manages, and takes the risks of running a business.4. The amount by which income exceeds costs.5. One to whom the business owes money.6. Unable to pay one’s debts and legally freed from the responsibility of paying

them.7. Business activity related to providing help, repair or assistance as opposed to

selling or producing.8. A principle, method or rule which determines how an organization is

operated.9. A system of recording and summarizing business and financial transactions

and analyzing, verifying, and reporting the results.10.The amount by which the cost and expenses exceed the income.11.An interest-bearing certificate of public or private indebtedness.12.The action of making goods for human wants13.Total output.

Assignment to text 1: 1. Complete the text using the words in the box:

losses financial corporations partnership premises creditorsissue liability registered sharessole trader capitalprospectus files bankruptcy

Text 1 Types of Business

The simplest form of business is the individual proprietorship or- (1)………….: for example, a shop (US = store) or a taxi owned by a single person. If several individuals wish to go into business together they can form a (2)………..; partners generally contribute equal capital, have equal authority in management, and share profits or (3)………... In many countries, lawyers, doctors and accountants are not allowed to form

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companies, but only partnerships with unlimited (4) ……….. for debts - which should make them act responsibly.

But a partnership is not a legal entity separate from its owners; like sole traders, partners have unlimited liability: in the case of (5) ……….., a partner with a personal fortune can lose it all.

Consequently, the majority of businesses are limited companies (US = (6) ………..), in which investors are only liable for the amount of capital they have invested. If a limited company goes bankrupt, its assets are sold (liquidated) to pay the debts; if the assets do not cover the debts, they remain unpaid (i.e. (7) ……….. do not get their money back.)

In Britain, most smaller enterprises are private limited companies which cannot offer (8)………..to the public; their owners can only raise capital from friends or from banks and other venture capital institutions. A successful, growing British business can apply to the Stock Exchange to become a public limited company; if accepted, it can publish a (9) ……….. and offer its shares for sale on the open stock market. In America, there is no legal distinction between private and public limited corporations, but the equivalent of a public limited company is one (10) ……….. by the Securities and Exchange Commission.

Founding a CompanyFounders of companies have to write a Memorandum of Association (in

the US, a Certificate of Incorporation), which states the company's name, purpose, registered office or premises and authorised share (11) ………..

(12) ……….. (always with an У at the end) - is the technical term for the place in which a company does its business: an office, a shop, a workshop, a factory, a warehouse, etc. Authorised share capital means the maximum amount of a particular type of share the company can (13) ………..

Founders also write Articles of Association (US = Bylaws), which set out the rights and duties of directors and different classes of shareholders. Companies' memoranda arid articles of association, and annual (14) ……….. statements are sent to the registrar of companies, where they may be inspected by the public. (A company that (15) ……….. its financial statements late is almost certainly in trouble.) In Britain, founders can buy a ready-made "off-the-shelf company from an agent, that is, a company formed and held specifically for later resale; the buyer then changes the name, memorandum, and so on.

Assignment to text 2:

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1. Read the following text and then decide whether the statements following are TRUE or FALSE.

A company can only be floated once. Banks underwrite share issues when they want to buy the shares. It is easier for a company to be quoted on an unlisted securities market

than on a major stock exchange. Unlisted companies do not publish annual reports. The market price of a share is never the same as its nominal value. On the London Stock Exchange it is possible to make a profit. without ever paying anyone any money. If a company issues new shares, it has to offer them to

existing shareholders at a reduced price. A scrip issue can be an alternative to paying a dividend. American corporations with large amounts of cash can spend

it by buying their own shares. Companies do not have to sell their shares at their nominal value.

Text 2 Stocks and Shares

The act of issuing shares (GB) or stocks (US) - i.e. offering them for sale to the public - for the first time, is known as floating a company or making a flotation. Companies generally use a bank to underwrite the issue. In return for a fee, the bank guarantees to purchase the security issue at an agreed price on a certain day, although it hopes to sell it to the public. Newer and smaller companies trade on "over-the-counter" markets, such as the Unlisted Securities Market in London. Successful companies can apply to have their shares traded on the major stock exchanges, but in order to be quoted (GB) or listed (US) there, they have to fulfil a large number of requirements. One of these is to send their shareholders independently-audited annual reports, including the year's trading results and a statement of the company's financial position.

Buying a share gives its holder part of the ownership of a company. Shares generally entitle their owners to vote at companies' General Meetings, to elect company directors, and to receive a proportion of distributed profits in the form of a dividend (or to receive part of the company's residual value if it goes into bankruptcy). Shareholders can sell their shares at any time on the secondary market, but the market price of a share - the price quoted at any given time on the stock exchange, which reflects how well or badly the company is doing - may differ radically from its nominal face, or par value.

At the London Stock Exchange, share transactions do not have to be settled until the account day or settlement day at the end of a two-week accounting period. This allows speculators to buy shares hoping to resell them

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at a higher price before they actually pay for them, or to sell shares, hoping to buy them back at a lower price.

If a company wishes to raise more money for expansion it can issue new shares. These are frequently offered to existing shareholders at less than their market price: this is known as a rights issue. Companies may also turn part of their profit into capital by issuing new shares to shareholders instead of paying dividends. This is known as a bonus issue or scrip issue or capitalisation issue in Britain, and as a stock dividend or stock split in the US. American corporations are also permitted to reduce the amount of their capital by buying back their own shares, which are then known as treasury stock; in Britain this is generally not allowed, in order to protect companies' creditors. If a company sells shares at above their par value, this amount is recorded in financial statements as share premium (GB) or paid-in surplus (US).

The Financial Times-Stock Exchange (FT-SE) 100 Share Index (known as the "Footsie") records the average value of the 100 leading British shares, and is updated every minute during trading. The most important US index is the Dow Jones Industrial Average.

Assignment to text 3:

1. Match the responses in part B with the questions in part A.

Text 3 Bonds

A1. So what exactly are bonds?

2. And how do they work?

3. So you have to keep them for a long time?

4. Why should that happen?

5. Oh, I see. Is that what they mean by below par?

6. But the bond's interest rate doesn't change?

7. How's that?

8. And people talk about AAA and AAB bonds, and things like that.

9. And what about gilts?

10.Not Treasury Bilk?

11.And James Bond?

B

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a. Because of changes in interest rates. For example, no-one will pay the full price for a 6% bond if new bonds are paying 10%.

b. Exactly. And the opposite, a bond whose market value is higher than its face value, is above par.

c. I knew you'd finish by saying that!d. No, not at all. Bonds are very liquid. They can be sold on the secondary market

until they mature. But of course, the price might have changed.e. No, not unless it's a floating rate bond. The coupon, the amount of interest a

bond pays, remains the same. But the yield will change.f. No, those are short-term (three-month) instruments which the government sells

to and buys from the commercial banks, to regulate the money supply.g. That's the name they use in Britain for long-term government bonds - gilts or

gilt-edged securities. In the States they call them Treasury Bonds.h. They're securities issued by companies, governments and financial institutions

when they need to borrow money.i. Well, a bond's yield is its coupon payment expressed as a percentage of its

price on the secondary market, so the yield changes if you buy or sell above or below par.

j. Well, they usually pay a fixed rate of interest and are repaid after a fixed period, known as their maturity, for example five, seven, or ten years.

k. Yes. Bond-issuing companies are given an investment grade by private ratings companies such as Standard & Poors, according to their financial situation and performance.

Assignment to text 4:

1. Read the title. What do you expect to read in this text?2. Read and translate the subtitle.3. Read the text and divide it into parts (logically). Justify your division.4. Mark all pros and cons of any off-the-shelf company.5. Translate the text. Ensure that you haven’t missed any information.6. The author writes: “I would think twice before becoming a General Director

of a company that is being sold to a new owner”. Explain, why.7. Is the situation described similar to American realities that you have come to

know from the previous units?

Text 4 Starting Your Own Business in Russia:

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Off-the-Shelf Company vs. Incorporating a Company From Scratch

It is possible to start a business in Russia by buying an off-the-shelf company instead of trying to incorporate a company from scratch but whether or not this is the best way, Timur Beslangurov explores below.

OFF-THE-SHELF COMPANY: PROS AND CONSWhat is an off-the-shelf company in Russia? This type of company is

usually a Limited Liability (OOO) or Private (Closed) Joint Stock Company (ZAO) that already exists and ready to be sold to a needy businessperson. This means that the company has founders, a general director, and a registered (legal) address. And it has submitted statuary and accounting and tax reporting during the entire period of its activity.

The founder of an off-the-shelf company may be an individual or a legal entity or both. Therefore you will have to buy this company from its founders by entering into a share (stock) purchase agreement. After the agreement is signed, you will have to make amendments to the by-laws of the company and inform the tax authorities about the relevant changes. If you don’t wholly buy the company – you don’t formally own the company and you are not entitled to operate or manage the company or receive dividends. There is no such thing as a “beneficial owner” in Russia as in other countries.

The General Director of an off-the-shelf company is usually one individual. Again, Russian legislation does not recognize such a thing as a nominal director, as other countries do. This means that the Director of an off-the-shelf company is, on the one hand, fully liable for the activity of the company and, on the other hand, it is impossible to fully restrict his powers in the day-to-day management of the company. This means that even by issuing a general power of attorney to a different person, the General Director cannot transfer liability – administrative or criminal. I would think twice before becoming a General Director of a company that is being sold to a new owner! On the other hand, one can limit the powers of General Director by the by-laws, but only to some extent, as you wouldn't be able to restrict his right to manage the bank accounts, but only limit the amount of withdrawals per transaction. A registered or (so-called legal) address shouldn't be used for company registration purposes for several important reasons. It is illegal to use a residential premise for company registration purposes, although occasionally you come across off-the-shelf companies that have a residential address as a registered address. The company has to be located physically nearby the tax authorities. If the tax authorities cannot physically locate the company they may impose heavy fines. If you plan to rent office premises where the company will actually be located, you will have to go through either the registration of a subdivision of your company with the tax authorities at the address of the office premises or re-register your company's location from the registered address to the real office address, which may require the changing of tax district authority followed by a tax official's visit.

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Moreover, if you plan to employ foreigners in your company you will not be able to do so legally if you have a registered address instead of an actual office, because migration authorities may be issuing work visas for future employees. Migration authorities usually visit a company in order to be sure that the company physically exists and is not a "one-day" operation involved in illegal immigration.

Submission of statutory accounting and tax reporting must be done during the duration of the company's existence. It is a mistake to think that off-the-shelf companies have dormant accountancy; each company has a general director. According to the law a general director has to receive a salary, even a minimal amount. This is a requirement. When buying an off-the-shelf company you have to be sure that everything is done properly and there are no tax liabilities. It is troublesome to find an off-the-shelf company that officially paid a salary to a general director and which accounted for it properly because the cost of such a company would increase every month, and the older the company, the harder it would be to sell it.

These are the "cons" of the registration of an off-the-shelf company, but what are the "pros"? The only one is time. But if you plan to have a serious business, you should approach the issues seriously and plan everything including the company registration process carefully. You may create a lot of difficulties right from the start by buying an off-the-shelf company without proper planning. A well known phrase is quite right in this case - "fail to plan - plan to fail.

One may note that all of the above-mentioned cons could be solved from the start by amending everything - registration of the new owners, appointment of the new general director, a change of address, making due diligence and paying all of the taxes due. But please do not forget about one more requirement. According to existing practice enforced by tax authorities, an application with all the amendments should be signed personally by the existing (nominal) general director in the presence of a notary public and personally be submitted and collected from the tax authorities. This is a warning to you because very often such nominal directors do not even know that they are directors; in hundreds of such off-the-shelf companies, they were appointed illegally. This fraud takes place when a passport is lost or stolen (identity theft) or a homeless person "sells" his identity to become a general director for 100 roubles.

The question is who will make all the changes; you or the company that sold you this off-the-shelf company? If you make the changes, what are the additional costs? If there are no additional costs, what will be the costs of the off-the-shelf company?

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